ing countries. The OECD countries invested an average of 2.30% of the GDP during the period 1963-1969, by the beginning of this century they had slightly increased R&D to 2.58% of GDP. Scandinavian countries increased from 1.43% to 3.16% during the same period. In contrast, developing regions such as Latin America and the Caribbean or Africa have kept their R&D effort well below 1% during the same period. In particular, Latin America increased its R&D effort from 0.47% in the 1960s to 0.65% of GDP at the beginning of this century, while Sub-Saharan Africa passed from 0.24% to 0.63% of GDP. Table 2 also shows the R&D effort from leading economies. During the period 1963-2004 Japan increased its R&D expenditure from 1.95% to 3.31%; Israel increased from 1.03% to 4.71% of GDP, and the Republic of Korea increased from 0.45% to 3.54% during the same period.

Table 3 shows R&D expenditures per capita for the same group of countries and regions of Table 2. The difference between developed and developing countries is more striking than in Table 2. While Sub-Saharan Africa invested 14.2 dollars per capita and Latin America and the Caribbean invested 22.2 dollars per capita, developed countries invested several hundreds of dollars per capita. In particular, OECD countries invested 533.5 dollars per capita and Scandinavian countries 941 dollars per capita.

Table 4 shows the yearly average number of patents for the period 1963-2004. The number of patents from developed countries is several orders of magnitude larger than patents from developing countries. While the OECD patented 5581 inventions per year during the period 2000-2004, SubSaharan African countries patented an average of 2.5 patents and Latin America and the Caribbean 258.4. Furthermore, the developed economies more than doubled their number of patents per year since the 1960s. The estimations are conducted with a panel of five-year periods, and thus the estimations cover data from 1963-2002.

For the estimations of inter-firm spillovers we employ data from the Enterprise Surveys to estimate the magnitude (and direction) of intra-industry domestic and international knowledge spillovers at the firm level. The surveys were conducted by the World Bank, and they are designed to capture business perceptions about the biggest obstacles to enterprise growth, the relative importance of various constraints to increase employment and productivity, and the effects of a country’s business environment on its international competitiveness. Each survey was completed by managing directors, accountants, human resource managers and other company staff. The core survey is organized into two parts. The first part seeks managers’ opinions on the main constraints in the business environment. The second part focuses on productivity measures. The Enterprise Surveys sample from the universe of registered businesses and follow a stratified random sampling methodology. A small number of sectoral sub-samples are included to provide measures of productivity that can be compared across countries (within industries). Because the distribution of establishments in most countries is overwhelmingly populated by small and medium enterprises, surveys generally 14