How does the transfer of advanced technology spur innovation in developing countries? This paper exploitsudthe large-scale introduction of high-speed railway (HSR) technology into China in 2004 as a natural experiment to address this question. The experiment is unique in the sense that this wave of technology transfer is large, abrupt and arguably exogenous in timing, covering a variety of technology classes and a large number of geographically-dispersed railway-related firms. With detailed information on the types of technology transferred and the identities of the receiving firms, as well as their product marketudspecializations, we are able to depict a clear picture of how foreign technology is digested and spurs follow upudinnovation in and out of directly receiving firms. Our findings suggest that technology transfer leads toudsignificant growth in HSR-related patents in cities with direct receivers of imported technology after 2004 inuda triple-difference estimation. We also observe sizable spill overs to firms that are not directly related to theudrailway industry. Technology similarity plays an important role in technology diffusion, but we do not observe any significant impacts of geographic proximity. Previous university research strength in relevant fields is also conducive to stronger technology spill overs.
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