EFFECTS OF PATENTS ON PRODUCTIVITY GROWTH IN KOREAN MANUFACTURING: A PANEL DATA ANALYSIS

. We analyse the contributions of patents to total factor productivity (TFP) performance in Korean manufacturing industries during the period 1981–1999. This paper treats potential autocorrelation problems seriously and uses recent panel cointegration approaches to investigate the robustness of the patent‐TFP relationship. The results show that both domestic and foreign‐resident patent applications have significant positive effects on productivity and that foreign‐resident patent applications have a larger effect than domestic patents in improving TFP in Korean manufacturing. We also find evidence of knowledge spillovers among industries, in that the patent applications of other industries increase TFP in any single industry.