…the main finding — that R&D capital stocks of trade partners have a noticeable impact on a country’s total factor productivity — appears to be robust… [consider] a coordinated permanent expansion of R&D investment by 1/2 of GDP in each of twenty-one industrial countries. The U.S. output grows by 15 percent, while Canada’s and Italy’s output expands by more than 25 percent. On average the output of all the industrial countries rises by 17.5 percent. And importantly, the output of all the less-developed countries rises by 10.6 percent on average. That is, the less-developed countries experience substantial gains from R&D expansion in the industrial countries [emphasis added].
That is from Elhanan Helpman’s just-published The Mystery of Economic Growth. I’ll add that, more generally, Europe is a massive free-rider on American investments in pharmaceutical R&D; see Alex immediately below.
Are you looking for a good and readable summary of what economists know about economic growth? Helpman’s book is the place to start. And here is my earlier post on external returns from innovation.