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We examine the impact of environmental regulation on the international diffusion of new technology through the patent system. We employ a dataset of automobile emission standards between 1992 and 2007 and corresponding data on cross-border patent inflows of technologies developed to comply with these standards. Our analysis, based on a research design of country pair years, shows it is “regulatory distance” between countries rather than absolute regulatory stringency per se that matters for cross-border patent inflows: the flow of compliance technologies rises when regulatory standards in the inventor and the recipient countries become “closer”.

Regulatory Distance and the Transfer of New Environmentally Sound Technologies: Evidence from the Automobile Sector