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International Business Travel: An Engine of Innovation?

Business surveys and research have often reported that managers prefer face-to-face communication when negotiating deals and selling products. However, Nune Hovhannisyan and Wolfgang Keller go further in their paper "International Business Travel: An Engine of Innovation?" to show that face-to-face meetings are also important for the transfer of technology, reasoning that technology is tacit and usually best described and demonstrated in person. They examine the role of inward business travelers in raising a country’s rate of innovation by looking at business travel from the United States to thirty-six other countries during the years 1993-2003, using patents to measure innovation.

Their results indicate that international business travel has a significant effect on technology transfer through international trade and foreign direct investments. On average, a 10% increase in international business traveler arrivals leads to an increase in patenting by about 0.6%, which is substantial in this scope. Hovhannisyan and Keller also find evidence showing that the quality of the impact on innovation and patents is related to the quality of the technological knowledge carried by each business traveler. Furthermore, they suggest that cross-country income differences can be reduced through international air travel, issues that create the foundation for further research within labor market policies on how strongly short-term cross-border movements affect innovation.



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