Trade, Technology Transfer and Productivity Growth: The Neglected Role of Imports∗

We present evidence that importing is a driver of international technology transfer. Using a detailed panel of Indonesian manufacturers, our analysis shows that firms in industries supplying importintensive sectors have higher productivity than other firms. This finding suggests that linkages through vertical supply relationships are the channel through which import-driven technology transfer occurs. To our knowledge, these are the first firm-level results showing that imports play a role in technology adoption, measured by productivity gains. Together with the literature linking FDI and exporting to technology spillovers, we provide a third component to the argument that trade and openness promote growth.