I. Introduction, 221.—II. The sample of innovations, 222.—III. Estimation of social benefits: product innovations used by firms, 222.—IV. Parallel innovative efforts, time horizon, and rates of return, 226.—V. Product innovations used by households, 229.—VI. Process innovations, 231.—VII. Social and private rates of return, 233.—VIII. Factors associated with the gap between social and private rates of return, 235.—IX. Unemployment, repercussions on other markets, and future changes in technology, 238.—X. Conclusion, 239.

A LTHOUGH there has been considerable recent interest the effects of U.S. research and development on our foreign trade, little, if any, effort has been made to study the reverse flow of causal forces-namely, the effects of American foreign trade on our research and development activities. In 1973, the National Science Foundation convened a conference of leading economists that considered the question: What effects do international trade, foreign direct investment, and foreign licensing have on U.S. technological innovation? It was concluded that in spite of the importance of this question, there seems to be a complete void our knowledge.1I In this paper, our purpose is to present some new findings bearing on this topic, as well as on the ways which American firms transfer their technology abroad. Although our findings are subject to a variety of limitations, they seem to represent some of the first systematic evidence related to these topics.