RETHINK-GSC: Policy Proposal to Mitigate Threats to Knowledge Spillovers through Global Supply Chains

For economic development and innovation, knowledge transfer and spillovers are essential. Knowledge transfer and spillovers occur not only locally but also through global supply chains (GSC) and thus can benefit stakeholders and countries involved in the supply chains globally.

As part of the EU-funded KCG research project, RETHINK-GSC, researchers explore the role of knowledge spillovers through the global supply chains, discuss the risks of knowledge fragmentation and analyze how geopolitical development challenges the functioning of global supply chains, thus impeding knowledge flows along the supply chains.

Niclas Frederic Poitiers, Ph.D. (Bruegel) and Kamil Sekut (Bruegel) indicate in their RETHINK-GSC Policy Brief that Research and Development (R&D) activities and innovations benefit not only the inventors but also others who have direct or indirect access to the innovations and the embedded knowledge. With globalization and firms’ international economic activities, cross-border knowledge transmission and spillovers have been intensified, enabling countries involved in global supply chains to better benefit from knowledge created remotely.

Cross-border knowledge transmission is, however, increasingly threatened by emerging policies designed by some countries to better manage risks from high economic dependencies, to secure national interests and to protect their technological sovereignty. Also, deglobalization, which describes the “shift towards less trade intensive growth”, makes it more difficult, particularly for developing countries, to take part in GSCs and to benefit from important knowledge transfers and spillovers.

Poitiers and Sekut (2024) identify channels through which foreign direct investments affect global knowledge transmission and channels through which protectionist policies impede such knowledge transmission and spillovers. In light of intensifying protectionist policies and the rising challenges upon cross-border knowledge spillovers, they underscore that it is essential to limit policies that may negatively affect knowledge flows in narrowly defined strategically important areas. Outside these areas, diversifying supply chains is key to, on the one hand, further benefit from an open innovation ecosystem and, on the other hand, enhance the resilience of the global economy.

The policy brief “Knowledge Spillovers and Geopolitical Challenges in Global Supply Chains“(Poitiers. N.F. & Sekut, K., 2024) published as part of the RETHINK-GSC project, is available here.

The RETHINK-GSC project, funded by the EU’s Horizon Europe program, is a research project that uses innovative methods to analyze the effects of global supply chains (GSCs) and develops new methodologies to quantify the role of knowledge flows and service inputs. The aim of RETHINK-GSC is to capture the increasing importance of intangibles in global production and to provide new insights into ongoing and expected changes in global production processes. Prof. Holger Görg, Ph.D., KCG Managing Director, leads the RETHINK-GSC project. Aaron Lohmann, KCG Fellow, is involved in the project research. More on RETHINK-GSC can be found here.