International Business Travel: An Engine of Innovation?

Abstract

While it is well known that managers prefer in-person meetings for negotiating deals and selling their products, face-to-face communication may be particularly important for the transfer of technology because technology is best explained and demonstrated in person.This paper studies the role of short-term cross-border labor movements for innovation by estimating the recent impact of U.S. business travel to foreign countries on their patenting rates.Business travel is shown to have a signi…cant e¤ect up and beyond technology transfer through the channels of international trade and foreign direct investment.On average, a 10% increase in business travel leads to an increase in patenting by about 0.2%, and inward business travel is about one fourth as potent for innovation as domestic R&D spending.We show that the technological knowledge of each business traveler matters by estimating a higher impact for travelers that originate in U.S. states with substantial innovation, such as California.This study provides initial evidence that international air travel may be an important channel through which cross-country income di¤erences can be reduced.

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