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R&D and Productivity Growth: A Review of the Literature
Abstract
This paper reviews the literature on R&D to provide guidelines for recent efforts to include R&D in the national income accounts. The main conclusions are: 1. Measures of R&D as an asset held by a particular owner must be complemented by estimates of the spillover effect of R&D in order to obtain a reliable measure of the overall effect of R&D on productivity growth. 2. If research financed by the government and research financed by business are both counted as investment, some double counting occurs and growth accounting analysis overstates the role of research relative to other factors. 3. The overall rate of return to R&D is very large, perhaps 25 percent as a private return and a total of 65 percent for social returns. However, these returns apply only to privately financed R&D in industry. Returns to many forms of publicly financed R&D are near zero. 4. Firm R&D should be allocated to the different industries in which a firm produces, rather than all credited to the firm’s main industry. An allocation procedure is proposed. 5. Much further work needs to be carried out to understand how R&D conducted in the richest countries is transmitted to developing countries. Detailed microeconomic data on firms or establishments in developing nations will be necessary to understand the channels of technology transfer more fully.
... A large number of existing studies have shown that even for highly advanced economies like the United States, the outcomes of R&D in foreign countries play an important role in its own technical progress. Most of the other countries in the world are far more dependent on foreign R&D (Sveikauskas 2007). Therefore, innovation and diffusion of knowledge are both strongly related to globalization. ...
... There have been many empirical studies to estimate the private and social returns on R&D. Sveikauskas (2007) reviews the estimates of the private and social returns on R&D shown in the previous studies. The private return on R&D has generally been estimated by comparing productivity growth or profitability in different firms with R&D expenditures or the growth of the research stock within these firms (Sveikauskas 2007). ...
... Sveikauskas (2007) reviews the estimates of the private and social returns on R&D shown in the previous studies. The private return on R&D has generally been estimated by comparing productivity growth or profitability in different firms with R&D expenditures or the growth of the research stock within these firms (Sveikauskas 2007). On the other hand, in order to estimate the returns to an industry or a national economy or even the returns to the world economy, the spillover effects of R&D and complementary investments have to be taken into account (Sveikauskas 2007). ...
This open access book explores the impact of deep regional economic integration on spillovers of knowledge and technology across countries. Deep integration through signing deep regional trade agreements (DRTAs), which cover various policy areas in addition to tariff reductions, may or may not facilitate technology spillovers among their signatories. To understand the mechanism of the impact of deep integration on technology spillovers, this book starts by analyzing the behavior of global firms. Factors that affect global firms’ activities, such as export, foreign direct investment (FDI), offshore outsourcing, are examined. Micro data on Japanese firms are employed for the analysis. Then, the relationships between bilateral trade patterns and technology spillovers and between types of FDI and technology spillovers are investigated in detail. Patent citation data are used to measure technology spillovers. Finally, the impact of DRTAs on international technology spillovers is analyzed. This book is highly recommended to readers who are interested in the effects of deep regional integration, including academic scholars, policymakers, and graduate students.
... 8 First, we do not impose having only one (cointegrating) equation for productivity, which would press all information for five or four relations into one equation; instead, we assume, after testing for cointegration, four triple-wise cointegrated relations, which generate more and better information (Kilian and Lütkepohl 2017, p. 103) that is typically shown through a higher log-likelihood for models with more cointegrating relations, provided they are economically plausible and statistically significant. This allows us to deal explicitly with the suggestions of Park (1995) and Sveikauskas (2007), theoretically modeled by Park (1998), that public R&D works mainly through its effect on private R&D and, therefore, only indirectly on productivity. 9 Comparisons with the extended standard model, modeling only the direct effects of public R&D on productivity, and the extended Romer model of Park (1998), modeling only the indirect effects via private R&D on productivity, suggests that the standard model has tested only for the direct effects but not for the indirect effects of public R&D stocks working via the private R&D stock. ...
... In the third relation in Table 5, the DOLS result for the effect of public on private R&D has the same elasticity as a result for OECD industries and French firms and industries in a static panel data analysis by Moretti et al. (2023). 26 A positive effect of publicly funded on privately funded R&D was found for OECD countries by Guellec and Van Pottelsberghe de la Potterie (2003b), 27 who also point to a positive relation in earlier macroeconomic studies, as well as by Pain (2005a, 2005b), Falk (2006) and Sveikauskas (2007), where Falk uses university R&D data. The third relation supports the results of Soete et al. (2020Soete et al. ( , 2022, mainly for EU countries, and Rehman et al. (2020), for a larger panel, regarding the effect of publicly performed on privately performed R&D. ...
This paper addresses the controversial issue of the direct and indirect effects of public R&D on growth. We look at six variables of R&D-driven growth jointly for 14 OECD countries using methods of dynamic systems for panel data analysis: GDP, technical change, domestic and foreign businesses and public R&D. Cointegration tests suggest four long-run relations for the six variables. We estimate these relations using group mean versions of fully modified and dynamic OLS. Domestic public R&D has positive long-run regression coefficients for direct effects on productivity and indirect ones via private R&D. Here, we build a panel vector-error-correction model with these long-term relations. Shocks to domestic public R&D enhance domestic private R&D, technical change and the GDP. Permanent changes in foreign public and private R&D have positive growth effects, which are transitional for foreign public R&D.
... An innovation in one firm, business sector, industry or country can trigger new avenues of research, instigate new research projects, or find new uses in other firms, sectors or countries [19]. R&D varies from other forms of investments in numerous respects; the main distinguishing factor is that payoffs from R&D are not restricted to the original investors, but also accrue to other firms, competitors, suppliers, customers and society at large [42]. ...
... Various forms of knowledge are useful to other organizations (and so have a social return) even if they no longer pay off to the organization that initiated the research (no longer have a private return). Consumers obtain better or cheaper products (benefit from social returns) even if the private return to businesses turns out to be small [42]. The notion of knowledge spillovers is very pertinent for growth and development, because it lays the underpinning for further knowledge creation and diffusion. ...
This research paper deals with steps being taken by companies to avoid and or minimize destruction of shareholder value and maximize social return on investment in the event of R&D portfolio changes
... An innovation in one firm, business sector, industry or country can trigger new avenues of research, instigate new research projects, or find new uses in other firms, sectors or countries (Hall et al., 2010). R&D varies from other forms of investments in numerous respects; the main distinguishing factor is that payoffs from R&D are not restricted to the original investors, but also accrue to other firms, competitors, suppliers, customers and society at large (Sveikauskas, 2007). Griliches (1992) differentiates between two spillover types; rent spillovers and knowledge spillovers. ...
... Various forms of knowledge are useful to other organizations (and so have a social return) even if they no longer pay off to the organization that initiated the research (no longer have a private return). Consumers obtain better or cheaper products (benefit from social returns) even if the private return to businesses (Sveikauskas, 2007). The notion of knowledge spillovers is very pertinent for growth and development, because it lays the underpinning for further knowledge creation and diffusion. ...
Knowledge begins life as a public good available to all (non-rival and non-excludable), and as an input into the generation of additional knowledge is made, it subsequently becomes artificially scarce as countries grants intellectual property rights to stimulate investment in the production of private knowledge goods (Maskus and Reichman, 2004). However, patent policy has strongly sought to protect intellectual property rights and investment made by innovation rather than by strengthening the tradability of R&D inventions in a market thereby ensuring economic growth (Troy, 2012). Changes in the external and internal business environment may induce a redirection of company strategy, which can result in the destruction of a company's valuable intellectual assets (people and knowledge), generated through formal R&D investment. These intellectual assets may be of value to both the company and society, and their termination of projects as a consequence of the reshaping of company R&D portfolios may result in the destruction of knowledge useful to society. The objective of this research is to establish the extent to which uncertain business environment induce changes in R&D portfolios, and as a consequence destroy shareholder value. Develop an R&D PPM methodology which can be used to mitigate the risk of the destruction of valuable intellectual assets as a consequence of changes in business strategy. This research study investigates four important aspects: 1) What is the likelihood of a change in business strategy that will impact negatively on an R&D project portfolio value? 2) What is the extent of the impact of changing business strategy on R&D portfolio value (this is equivalent to the benefit that will be gained by ensuring that R&D portfolio value is not reduced by changes in business strategy)?, 3) What steps are being taken by companies to avoid destruction of shareholder value and maximize social return on investment in the event of R&D portfolio changes, and; 4) What portfolio management methodology can be used to mitigate the risk of portfolio value destruction as identified in questions above? The population was drawn from South African R&D intensive manufacturing companies, this population includes medium-sized enterprises as well as large organisations listed on the Johannesburg stock exchange. Data was collected using an online instrument and telephone interviews during this study phase while the questionnaire was developed for Phase one of the study and to be further developed and refined of item wording and structure for use in Phase two and three. The analysis of the findings of the Phase 1 of this study show manufacturing companies are affected by changes in business strategy. Private R&D outputs can be divided into those that lead to new company innovation (new International Association for Management of Technology IAMOT 2016 Conference Proceedings 1713 products, processes and services), those that have value but are discontinued due to change in company strategy or lack of funds, and those that have no immediate value. Many companies are sitting on huge reservoirs of new knowledge which is never revealed. This knowledge has intrinsic value. It should be possible to create an alternative means of publication which will allow public access. The ultimate argument is that the overall return on private R&D could be improved if these outcomes are freely available, especially if there is a change in strategy and the projects are discontinued for non-technical reasons. Uncertain business environment and consequent changes in company strategy have a negative influence on R&D portfolio value.
... In spite of the risk involved, R&D activities undertaken by enterprises are an important driver of economic development. This is mainly due to the fact that social rates of return are much higher than private rates of return (Griffith, 2000;Fraumeni & Okubo, 2005;Sveikauskas, 2007). There are a number of studies concerning (2002) average rates of return on R&D investment. ...
... Во-первых, исследования и их коммерциализация действительно важны, однако это, видимо, касается лишь финансируемых частными организациями исследований. Проведённое в 2007 г. исследование Офиса продуктивности и технологий США (часть бюро трудовой статистики США) [Sveikauskas, 2007] показывает, что, если рентабельность частных НИОКР составляет около 25% (а вместе с внешними эффектами 65%), то рентабельность большинства форм государственных инвестиций близка к нулю, включая и эффекты для общества. Отметим, что в данном случае речь идёт о стране с высоким качеством государственного управления, где от госаппарата следовало бы ожидать особенно благоприятных результатов. ...
Governments unencumbered by fear of elections often find it more manageable to implement liberal economic reforms than their democratically elected counterparts. The success of these reforms contributes to the broadening and solidifying of support within society. However, the endurance of reform outcomes and the safeguards provided to private owners and businesses can sometimes prove less resilient over the long term. Such guarantees may face challenges, particularly during changes in leadership, be it under dynastic rule or, especially, other forms of power transitions. The durability of reforms implemented in Uzbekistan and Kazakhstan remains to be seen over time. Nevertheless, the attained results and immediate prospects evoke a sense of cautious optimism, promising potential positive outcomes for the future.
... Johns claimed that long-run growth could be possible through R&D activities [Jones, 1995]. R&D effects on aggregate production functions were tested by national research centers in the early 2000s [Sveikauskas, 2007]. It is well established that technological development and innovation capability are the main drivers of incremental growth across various industry sectors. ...
... However, these returns apply only to privately funded industrial R&D and the return on publicly funded R&D is close to 0%. Finally, Sveikauskas explores the possibility of the transfer of R&D conducted in developed countries to developing countries, which requires a more complete understanding of technology transfer channels [4]. Chen tested customer education on customer choice through survey and statistical analysis. ...
... They exceed the private return by 50 to 100 per cent. Sveikauskas (2007) suggests that the private return to R&D is around 25 per cent, while the social return is 65 per cent. ...
The paper presents the current understanding of the role of public R&D in economic growth and the science–industry links from middle-income economies like Bosnia and Herzegovina (BiH). In the second part, we present the conventional view on science–industry links which see these linkages primarily in terms of a one-way transfer of knowledge or its commercialisation from R&D to the business enterprise sector. Based on the comparative data, which also includes BiH, we show an alternative approach and argue about its relevance in the context of BiH. Our conclusion is that science–industry links (SIL) should support technology upgrading and not (or not only) R&D based growth. In the next section, we present the current understanding of the role of public R&D in economic growth. Section two explores the role of public R&D in the catching up context, while section 3 explores specifically the role of science-industry links in catching up context. Section 4 proposes a ‘Triple Helix’ approach to science - industry linkages for catching up economies. We illustrate its features within the data for the central and east European economies. Finally, section 5 concludes with implications for BiH
... The latter figure, however, would have been affected by the wars, recessions and protectionism of the first half of the 20th century and was, in spite of this and the absence of significant public funding, higher than the 1.6 per cent estimated for the 1850-1900 period. 4 Statistical studies of Federal funding (Sveikauskas (2007)) as well as cross-country studies (OECD (2003)) have failed to find a clear positive impact of government support of R&D on economic growth. These initially surprising findings cast doubt on the standard 'linear model' and suggest that public sector science does not simply complement and crowd-in further private efforts but might, in some cases, substitute for them. ...
In standard economic theory, government support of science is expected to confer external benefits and ‘crowd-in’ additional private sector research. However, higher rates of economic growth from this effect are not easily discerned from the long run data, and government and business financed R&D have moved in opposite directions (as a proportion of GDP) since the early 1960s in the US and elsewhere. This paper looks at potential sources of ‘crowding out’ as well as ‘crowding in,’ and compares standard analysis with a ‘contribution good’ model of science. Two different policy issues are identified – the assembly of ‘critical mass’ for the ‘kick starting’ of commercial science, and the expansion of commercial science beyond its ‘private equilibrium’. We analyse the allocation of scarce business as well as scientific skills between sectors. The model produces regions of both crowding in and out. The latter dominates for very high wages in the public sector as the government deprives the private sector of the means to exploit new knowledge.
... Whether this is done successfully is a diff erent matter. In his review of R&D and productivity growth, Sveikauskas (2007) concludes that only privately fi nanced R&D off ers high returns and that publicly fi nanced R&D yields only indirect eff ects. Coccia (2010) fi nds that public R&D spending complements private spending only if the former does not exceed the latter. ...
Business R&D spending has been shown to exert both direct and indirect positive effects on value added. Nevertheless, the heterogeneity of the returns to R&D has seldom been examined. Using detailed sectoral data from Czechia over the period 1995–2015, this study finds that privately funded business R&D has both direct and spillover effects, but that the publicly funded part of business R&D only leads to spillovers. The results further suggest that both upstream and downstream spillovers matter, regardless of the source of funding, and that during the period studied, R&D returns were heavily affected by the economic crisis. Lastly, private R&D offers significant returns only after reaching a critical mass, while the effects of public R&D spending do not display such non-linearity. This heterogeneity in the returns to business R&D should be reflected in innovation policy design.
... Collinearity is not tested for. Whenever different types of R&D have an impact on each other, for example public on private R&D (Sveikauskas 2007), they should never both appear on the right-hand side of a regression, but rather econometric textbooks recommend using simultaneous equation models. 3. ...
We present semi-endogenous growth models with productivity as functions of domestic and foreign private and public R&D. In a small country case with a Cobb–Douglas productivity production function, foreign R&D drives steady-state growth and the production function can be a long-term relation in a vector-error-correction model (VECM). Marginal productivity conditions can be long-term relations for a vector-error-correction model if the functional form is of a VES function generalizing a CES function. Combining the marginal products of VES functions with recent evidence from VECMs for five countries shows that private and public R&D have a positive effect on productivity (except for France), and a negative R&D augmenting technical change. In the case of a VES function, steady states with constant R&D/productivity ratios exist only for special cases of parameter restrictions, which are not supported by the evidence.
... In addition, it remained significantly less than Scotland, which has a population of approximately twice that of Wales but three times the BERD spending. BERD is the most economically beneficial form of R&D by virtue of its stronger contribution to productivity growth than other R&D forms (Sveikauskas, 2007). Wales' poor performance in this measure as compared with other devolved regions of the UK illustrates its weaker region status. ...
This paper examines the use of European Union Structural Funds to support the development of innovation policy within Wales during the period 2000–06. Drawing on data from the Welsh government and interviews with key stakeholders, it focuses specifically on the Technium programme, a high-profile technology-based innovation intervention that took a predominantly supply-side approach to supporting innovation, resulting in its eventual failure. Consistent within this is an analysis of the efficacy of supply-side policies using European Union funds to support research and development activities to aid economic growth in peripheral, weaker regions.
... The indirect industrial effects should be discounted, but it is debatable what the appropriate rate should be (see, e.g. Ref. [41,42]). ...
Many impact assessments have been carried out to evaluate the economic and social effects of public investments in space. This paper focuses on ex post analyses of indirect industrial (intra-firm) effects, a sub-type of the impact assessments. A number of existing country-wide analyses report the ratio of the indirect industrial effects deriving from space-related contracts to the value of the space-related contracts placed with companies by governmental agencies (in Europe, mostly by the European Space Agency). This ratio is a widely accepted measure of the economic impact of the space contracts. The aim of this paper is to assess the usefulness of the ratio, a spin-off multiplier, for international benchmarking of the efficiency of space investments. The paper is the first attempt to provide an in-depth analysis of the methodological foundations of different country-wide studies on the spin-off multiplier performed in Europe. The country-wide studies have formulated different metrics and relied on different approaches to gathering quantitative data. The current paper discusses data quality issues that may result in a biased estimate of the spin-off multiplier. Data gathering techniques used in the studies tend to result in overestimated economic benefits. Even though the values of the spin-off multipliers are high in countries like Norway or Denmark, the confidence interval of the estimates is wide. The paper discusses time considerations to be taken into account for a standardized ratio as there is a time lag of several years until research and development becomes operative. Despite several methodological limitations, measuring the indirect industrial effects is a valuable tool for governments, especially for smaller ESA member states, as such studies can be implemented at low cost and provide information on spillovers from space programmes.
... Business investments for innovation have significant private and social economic returns. The existing literature suggests that the overall return to R&D investment is very large: about 25 percent as a private return and 65 percent for social returns (Sveikauskas, 2007). ...
Purpose: The purpose of this paper is to explore current situation of investments in R&D in Macedonia, compared to other western Balkan countries, with specific focus on business investments in R&D. The incentives of the business sector to invest in research and innovation activities, the return on these investments and industry-science collaborations are also explored. A case study of a Macedonian company, which established private research institute, creating a collaborative innovation partnership, is explained. Design/methodology/approach: Qualitative research in a form of interviews among mangers and case study of Macedonian company was used to obtain data about the motives for investments in R&D and explore the collaborative innovation partnership between the company and the research institute. Findings: The findings show strong collaborative partnership between company and research institute which is strongly influential of the competitiveness of the company. Research limitations/implications: This specific collaborative innovation partnership explored in this paper is very rare case in Macedonia. More examples and studies like this are needed to propose specific model and make strong recommendations. Our recommendation is to replicate the research and compare the analyses with different companies. Practical implications: This study is expected to increase the motivation of other companies to invest more in R&D activities and engage in collaborative innovation partnerships. Originality/value: This research contributes to the filed by offering new findings and proposing new model for enhancing company's competitiveness and innovation. This study adds to the body of literature in what is considered relatively new and unexplored area of study. The survey conducted in Macedonian company contributes a lot for the knowledge about business investment in R&D in Macedonia.
... These findings are consistent with more recent studies and the economic theory [2], [3] that indicate technical change as a major source of long-term productivity growth. The overall rate of return to R&D is quite impressive; it is estimated at 25% for private returns and at a total of 65% in terms of overall social returns [4]. ...
... Johns claimed that the long run growth could be possible by R&D activities (Jones, 1995). R&D effects on aggregate production functions were tested by national research centers in the early 2000s (Sveikauskas, 2007). R&D activities and productivity growth were most clearly analyzed in literature by Loo and Soete (Loo & Soete, 1999). ...
This paper focuses on the influence of technological progress and innovation on the Turkish economy. The economic structure of Turkey has changed dramatically over the last three and a half decades during which technology has become a crucial endogenous variable in aggregate production function. The new technology investments brought with them high productivity rates and rapid, positive economic growth. The inter-relation between technological progress and economic growth is summarized and analyzed using quantitative methods. The Econometric results show a significant effect of technological progress and innovation on economic growth.
... 21 The coefficient of determination for the two-level model is given by: EFIGE firms introducing process-innovation perform better than firms that do not innovate. The results concerning human capital and process innovation are coherent with the expectation that a firm's performance improves as a result of its propensity for innovation and the presence of skilled workers (see, e.g., Krueger and Lindahl 2001;Sveikauskas 2007). Basically, this is why qualified employees provide a firm with the capability not only to develop new processes, but also to absorb knowledge made by other firms (Cohen and Levinthal 1990). ...
This paper analyses the TFP heterogeneity of a sample of manufacturing firms operating in seven EU countries (Austria, France, Germany, Hungary, Italy, Spain and UK). TFP data refer to 2008. The empirical setting is based on the multilevel modelling which provides two main results. Firstly, we show that TFP heterogeneity is largely due to firm-specific features (85% of TFP variability in the empty-model). Interestingly, we find that some key-drivers of firm performance (size, family-management, group membership, innovations and human capital) are significantly related to TFP, but do not, on the whole, absorb much of firm-TFP variance, implying that differences in productivity are due to notable yet unobservable firm characteristics. Secondly, as far the role of localization is concerned, we demonstrate that country-effect is more influential than region-effect in explaining individual productivity. Net of the country-effect, the localisation in different European regions explains about 5% of TFP firm heterogeneity. When considering the case of three individual countries (France, Italy and Spain), location in different regions explains 5.3% of TFP heterogeneity in Italy, while this proportion is lower (3.6%) in France and higher (9.9%) in Spain.
... There have been many studies exploring the economic impacts of R&D at the firm, industry and national levels, with the former exploring private returns and the latter social returns (Bernstein and Nadiri 1991;Griliches 1995;Industry Commission 1995;Salter and Martin 2001;Scott et al. 2002;Dowrick 2003;Shanks and Zheng 2006;Martin and Tang 2007;Sveikauskas 2007;Hall et al. 2009). A characteristic finding is that returns to R&D are high. ...
A knowledge economy has been described as one in which the generation and exploitation of knowledge has come to play the predominant part in the creation of wealth. It is not simply about pushing back the frontiers of knowledge; it is also about the more effective use and exploitation of all types of knowledge in all manner of economic activities (Department of Trade and Industry 1998). Small and medium sized enterprises (SMEs) form a major part of many econo- mies and they play a key role in innovation. Consequently, SME access to and use of research findings is important, not only for firm-level performance but also for the overall performance of national economies. The aim of this study is to examine levels of access to and use of research and technical information by knowledge-based SMEs in Denmark. We explore current levels of access and use, whether there are any barriers to access, access difficulties or gaps, and the costs and benefits involved in accessing research findings.
... Therefore, we include the share of exports in total sales (Melitz 2003;ISGEP 2008). Similarly, it is widely argued that a firm's performance improves as a result of its innovative behaviour and the presence of skilled workers (see, for example, Krueger and Lindahl 2001;Sveikauskas 2007). In the survey carried out by UniCredit-Capitalia, white-collar workers and exports only refer to 2006. ...
Sectoral and territorial specificities affect a firm’s capabilities of being productive. While there is a wide consensus on this, a quantitative measure of these effects has been lacking. To this end, we combine a data-set of Italian firms with some meso regional and sectoral variables and apply a cross-classified model that allows for a clear distinction between firm, region-specific and sector-specific effects. After observing a marked TFP heterogeneity across firms, the paper addresses the issue of understanding how much differences in firms’ productivity depend on regional localisation and sector specificities. Results refer to 2004-2006 and have three aspects. First, they confirm that the main source of firm variety is mostly due to differences revealed at individual level. Secondly, we find that the sector is more important than location in explaining firms’ TFP. Lastly, the results show that firm TFP increases when it belongs to more innovative sectors. Similarly, companies get benefits from belonging to sectors where there is a high proportion of firms using R&D public support and a high propensity to collaborate in innovative projects.
... The production function is thus expanded by using two monetary capital variables, i.e. R&D investment (N)because of its major impact on productivity (Zachariadis 2004, Sveikauskas 2007 and the economic impacts of extreme resources represented by outlier KLEMS 7 (O). The purpose of the concept of outlier KLEMS (natural resources in excess, extreme economic or financial comparative advantages, low taxation and cheap labour resources, etc.) is to prevent such extreme resources from distorting the productivity results, i.e. ...
Purpose
– The purpose of this paper is to examine to what extent national intangible capital (NIC) explains GDP growth and to assess its impact on GDP formation in different countries. The paper brings a new perspective to explaining hidden economic drivers.
Design/methodology/approach
– The paper introduces a new theoretically and computationally justified method, so-called ELSS model that is based on expansion and augmentation of the Cobb-Douglas production function with a wide range of NIC indicators. The method is applied by using the database that contains NIC indices for 48 countries covering the period from 2001 to 2011.
Findings
– The results show that intangible capital accounts for 45 per cent of world GDP. The figure for the USA is 70.3 per cent and for the European Union 51.6 per cent. The Nordic countries stand out with a higher figure at 64.7 per cent, with NIC contributing to 72.5 per cent of GDP in Sweden, 69.7 per cent in Finland and 67.6 per cent in Denmark.
Research limitations/implications
– The expanded Cobb-Douglas production function is sensitive to valuations of capital inputs and sensitive to estimates of production shares for various augmenting and expanding inputs. Therefore further work is needed to develop and test methodologies for the assessment of all of these.
Practical implications
– ELSS production function helps to give a realistic picture of the value and impact of NIC and accordingly gives evidence for accurate investment decisions for the future.
Social implications
– The method will help policy makers figure out what steps are needed to reduce the cross-country NIC differences.
Originality/value
– The authors have uncovered the value of NIC beyond monetary inputs, and at the same time taken account of country specifics. The ELSS formula is comprehensive yet not too complicated to replicate. The approach significantly contributes to the development of the current research tradition into intangibles.
... The production function is thus expanded by using two monetary capital variables, i.e. R&D investment (N) – because of its major impact on productivity (Zachariadis 2004, Sveikauskas 2007 – and the economic impacts of extreme resources represented by outlier KLEMS 7 (O). The purpose of the concept of outlier KLEMS (natural resources in excess, extreme economic or financial comparative advantages, low taxation and cheap labour resources, etc.) is to prevent such extreme resources from distorting the productivity results, i.e. ...
... In addition, the estimations indicate that the coefficient of the dummy Process Innovation is positive and significant, implying that EU7-EFIGE firms introducing process-innovation perform better than firms that do not innovate. The results concerning human capital and process innovation are coherent with the expectation that a firm's performance improves as a result of its propensity for innovation and the presence of skilled workers (see, e.g., Krueger and Lindahl, 2001;Sveikauskas, 2007). Basically, this is why qualified employees provide a firm with the capability not only to develop new processes, but also to absorb knowledge made by other firms (Cohen and Levinthal, 1990). ...
This paper analyses the TFP heterogeneity of a sample of manufacturing firms operating in seven EU countries (Austria, France, Germany, Hungary, Italy, Spain and UK). TFP data refer to 2008. The empirical setting is based on the multilevel modelling which provides two main results. Firstly, we show that TFP heterogeneity is largely due to firm-specific features (85% of TFP variability in the empty-model). Interestingly, we find that some key-drivers of TFP (size, family-management, group membership, innovations and human capital) influence heterogeneity in productivity with the expect sign, but do not, on the whole, absorb much of firm-TFP variance, implying that differences in productivity are due to sizable yet unobservable firm characteristics. Secondly, as far the role of localization is concerned, we demonstrate that country-effect is more influential than region-effect in explaining individual productivity. Net of the country-effect, the localisation in different European regions explains about 5% of TFP firm heterogeneity. When considering the case of three individual countries (France, Italy and Spain), location in different regions explains 4.7% of TFP heterogeneity in Italy, while this proportion is lower (2.9%) in France and higher (7.6%) in Spain.
... Industrial innovation is increasingly global and performed collaboratively, requiring partners, resources, and ideas outside the company and national boundaries (Arora et innovation's impact in productivity and economic growth (Mendi 2007, Sveikauskas 2007, services 'offshoring' (Graham 2007;van Welsum 2004), 1 and to appropriately measure domestic stocks of R&D subject to capitalization in the National Accounts (Okubo et al. 2006). 2 At the same time, however, the concept of "R&D trade" or "R&D exports and imports" remains to be fully defined in official statistical manuals. Toward this end, this paper proposes a simple R&D statistics taxonomy that encompasses both expenditures and international transactions justifying a definition of "R&D exports and imports" in terms of established trade terminology, but at the same time consistent with the Frascati Manual (FM), the OECD manual that guides collection of R&D statistics. ...
International transactions in disembodied technology are critical indicators of globalization and knowledge diffusion. This paper develops an integrated framework that characterizes R&D expenditures and flows by systematically incorporating R&D performance, funding, and trade perspectives. This framework is used to formally define R&D exports and imports as the cross-border subset of market-based transactions. Secondly, the paper introduces new data on affiliated trade in R&D-related services and develops 'trade–expenditure ratios' as a first step toward analyzing the international distribution of R&D within MNCs. The paper concludes with brief observations on implications for further indicators development.
Experts in the System of National Accounts (SNA) recently considered whether marketing could be included as a capital asset in the national accounts and later recommended that marketing should be an intangible in the 2025 SNA (IMF, 2022, 2023). This paper prepares macroeconomic measures of the United States marketing stock and develops similar measures within 61 industries. We find that, from 1987 to 2020, marketing capital contributed approximately as much to output growth (0.18 percentage point per year) as R&D (0.15) or software (0.19) did. Software grew more rapidly, but marketing had a larger factor share. Marketing contributes even more to output growth if quality is adjusted to allow for the better targeting associated with digital advertising. There is a close relationship between data flows, software, and digital marketing and national accountants will have to allocate expenditures among these categories.
We analyze the dynamic interaction of Japan’s total factor productivity (TFP), GDP, stocks of domestic and foreign private and public as well as mission-oriented R&D, called GBARD in OECD statistics, in a vector-error-correction model (VECM) for Japan with stock data for the period 1987–2016. Permanent policy changes show the following main results: (i) GBARD as well as private and public R&D each encourage growth rates of the other R&D stocks and of TFP and GDP, and (ii) all have high internal rates of return; (iii) Japan’s R&D policies affect and are affected by foreign R&D; in particular, Japan’s public R&D has a positive impact on European private R&D, whereas other OECD countries’ R&D has a negative one. Japan’s R&D policies should be supported by education policies enhancing especially the number of PhDs and IT personnel.
Aktualna globalna pozicija Bosne i Hercegovine potvrđuje nalaz prethodnih istraživanja da u našoj državi ne postoji jedinstven ili barem harmonizovan i efikasan inovacioni sistem, primjeren potrebama razvoja društva i ekonomije znanja. Prvi koraci u utvrđivanju razloga ovakvog stanja su SWOT analize položaja i uloge inovacionog sistema u okviru opšteg strateškog planiranja i sektorskog planiranja istraživanja i transfera tehnologije. Najvažniji rezultati dobiveni iz tih matrica su diskutovani u radu. Oni su potom uspoređeni sa rezultatima naših najnovijih istraživanja. Prvi rezultat je sažeta SWOT matrica inovacionog sistema. Rezultate razrade pojedinih faktora smo prikazali u detaljnoj SWOT matrici zasnovanoj na elementima snage. I ova matrica je pokazala da je ujednačeno i stabilizirano visoko obrazovanje najvažniji element snage inovacionog sistema. Zbog toga su obilježja univerziteta kao subjekta inovacionog sistema posebno razmotrena.
Ovaj rad predstavlja trenutno razumijevanje uloge javnog istraživanja i razvoja (I&R) u ekonomskom rastu i veze nauke i privrede u ekonomijama srednjeg nivoa dohotka, poput Bosne i Hercegovine (BiH). U drugom dijelu predstavljamo konvencionalno viđenje veza nauke i privrede koje te veze razmatra prvenstveno u smislu jednosmjernog prijenosa znanja ili njegove komercijalizacije iz istraživanja i razvoja u sektor poslovnih preduzeća. Na osnovu uporednih podataka, koji uključuju i BiH, pokazujemo alternativni pristup i raspravljamo o njegovoj relevantnosti u kontekstu BiH. Naš zaključak je da bi veze nauke i privrede (VNP) trebale podržati ukupno unaprijeđenje tehnologija, a ne (tj. ne samo) rast zasnovan na istraživanju i razvoju. U sljedećem dijelu predstavljamo trenutno razumijevanje uloge javnog istraživanja i razvoja u ekonomskom rastu. Drugi dio istražuje ulogu javnog istraživanja i razvoja u kontekstu konvergencije, dok treći dio posebno istražuje ulogu veza nauke i privrede u kontekstu konvergencije. Četvrti dio predlaže “triple helix” pristup vezama nauke i privrede za konvergencijske ekonomije. Njegove karakteristike ilustrujemo kroz podatke za ekonomije centralne i istočne Europe. Konačno, peti dio daje zaključak sa implikacijama za BiH.
The study examines the interplays between R&D-GDP ratio and levels, and growth of per capita GDP of top ten countries in R&D expenditure and economies of different groups in both long and short runs during 1996–2017. The results show that R&D expenditure and per capita GDP growth rates have long-run associations for high-income and upper-middle-income groups along with Japan, Germany, South Korea, France, UK, India, and Brazil, and errors are corrected for all. Further, per capita GDP growth is the cause of R&D for OECD, upper-middle-, and low- and middle-income groups along with Japan, and R&D is the cause to per capita GDP for India, Russia, and Brazil. Finally, there is bilateral causality between the two for USA, China, and South Korea. Interestingly, there are no true long-run associations between R&D and per capita GDP, although some short-run interplays are there. Hence, the study prescribes that excessive spending in R&D at the cost of other sectors needs to be reviewed.
The industrial linkages and supply effects of the U.S. Research and Development (R&D) sector are examined using the input-output approach. Although the U.S. has the highest R&D intensity among major OECD countries, the U.S. R&D sector has relatively low backward and forward linkages to other industrial sectors. Moreover, the supply investment effect of the U.S. R&D sector is the least, showing that the sector is not likely to stimulate the production of the other sectors. The supply shortage effect of the U.S. R&D sector is also the least among the countries. The findings in this study imply that improving the linkages and supply effects of the R&D sector may be more important than increasing only the amount of R&D expenditure in the U.S.
This paper analyzes the patterns of health biotechnology publications in six Latin American countries from 2001 to 2015. The countries studied were Argentina, Brazil, Chile, Colombia, Cuba and Mexico. Before our study, there were no data available on HBT development in half of the Latin-American countries we studied, i.e., Argentina, Colombia and Chile. To include these countries in a scientometric analysis of HBT provides fuller coverage of HBT development in Latin America. The scientometric study used the Web of Science database to identify health biotechnology publications. The total amount of health biotechnology production in the world during the period studied was about 400,000 papers. A total of 1.2% of these papers, were authored by the six Latin American countries in this study. The results show a significant growth in health biotechnology publications in Latin America despite some of the countries having social and political instability, fluctuations in their gross domestic expenditure in research and development or a trade embargo that limits opportunities for scientific development. The growth in the field of some of the Latin American countries studied was larger than the growth of most industrialized nations. Still, the visibility of the Latin American research (measured in the number of citations) did not reach the world average, with the exception of Colombia. The main producers of health biotechnology papers in Latin America were universities, except in Cuba were governmental institutions were the most frequent producers. The countries studied were active in international research collaboration with Colombia being the most active (64% of papers co-authored internationally), whereas Brazil was the least active (35% of papers). Still, the domestic collaboration was even more prevalent, with Chile being the most active in such collaboration (85% of papers co-authored domestically) and Argentina the least active (49% of papers). We conclude that the Latin American countries studied are increasing their health biotechnology publishing. This strategy could contribute to the development of innovations that may solve local health problems in the region.
Industrial development requires research and innovation in them and research and development is informative light for each industry, including poultry industry. The aim of this article is investigate the role of research and development in the poultry industry and determine R & D priorities which lead to value creation in the industry. Research method in this paper is descriptive-survey and statistical community considered consists of experts the industry such as employees, managers and owners in the industry and research and development experts such as researchers, scholars, students and individuals who have some familiarity with R & D and poultry industry. For this purpose a questionnaire has designed and for increase reliability in the form of interviews - questionnaire acted to gather information from 12 cases from group workers and the owners of the industry, and 51 students from Ferdowsi University of Mashhad. In this study examined and proposed number of 10 hypotheses and by using correlation test is taking action ranking their impact on value creation in the poultry industry. This article specifies that R & D in this industry with using of new ways the product supply leads to more value creation and this subject as a suggestion for research and development of this industry can forgive more impact on their activities.
پیشرفت صنایع نیازمند تحقیقات ونوآوری درآنها وتحقیق وتوسعه چراغی آگاهی بخش برای هر صنعت از جمله صنعت مرغداری می باشد. هدف از این مقاله بررسی نقش تحقیق توسعه درصنعت مرغداری و تعیین اولویت های تحقیق وتوسعه است کهمنجر به ارزش آفرینی دراین صنعت می گردد. روش تحقیق دراین مقاله توصیفی-پیمایشی وجامعه آماری درنظر گرفته شده شامل خبرگان این صنعت ازجمله شاغلین ، مالکین ومدیران دراین صنعت وخبرگان تحقیق وتوسعه از قبیل محققین ،دانش پژوهان،دانشجویان وافرادی که به نوعی با تحقیق وتوسعه ویا صنعت مرغداری آشنایی داشته باشند.برای رسیدن به این مقصودپرسشنامه ایی طراحی گردیده ودرجهت افزایش روایی آن بصورت مصاحبه–پرسشنامه به جمع آوری اطلاعات از تعداد 32 نفر از گروه شاغلین ومالکین دراین صنعت و 13 نفر از دانشجویان دانشگاه فردوسی مشهداقدام گردیده است.تعداد 10 فرضیه دراین تحقیق مطرح و مورد بررسی قرار گرفته وبا استفاده از آزمون همبستگی به رتبه بندی در میزان تاثیر گذاری آنها درارزش آفرینیصنعت مرغداری اقدام گردیده است .دراین مقاله مشخص می گردد که تحقیق وتوسعه دراین صنعت با بکارگیری راههای جدید عرضه محصول بیشترین ارزش آفرینی را موجب می شود واین مطلب به عنوان پیشنهادی برای واحدهای تحقیق وتوسعه دراین صنعت می تواند اثر گذاری بیشتری را به فعالیتهای آنها ببخشد.
In recent years, evaluation and impact assessments (IA) of research and innovation (R&I) policies have become of interest both to scholars and policy makers. This paper examines public programmes and regulations aimed at stimulating R&I in Russian universities. For this purpose, 299 universities were surveyed in 2013–2014 to reveal their demand for relevant policies and the effects of these policies. We surveyed not only users and beneficiaries of the programmes, but also non-participating universities. Based on survey results, we assess the impact of the policies on universities and suggest recommendations to improve state regulations and evaluation practices.
How do new and foreign firms achieve superior productivity? Do they conduct more and better R&D? Or do they distinguish themselves through computerization and organizational capital? We investigate the determinants of and returns on several types of investment, using a panel of over 40,000 Ukrainian industrial firms in 2000–2007. Foreign firms engage in more non-technological investment and IT and in less R&D than domestic private firms. Similarly, new firms invest more in non-technological capital and IT and less in R&D than initially state-owned firms. Productivity gains from R&D and non-technology investment are insignificantly different across ownership types, whereas foreign firms achieve much higher returns on IT investment than other firms. These results suggest that foreign firms outperform others through organizational capital that is better able to exploit IT investment. New firm productivity growth is a result of higher investment volume rather than investment efficiency.
The ‘Great Transformation’ that occurred in Eastern Europe after 1989 involved many spheres: institutional, political, social and economic. Even considering only the economic sphere — in addition to the overall transition to market economies — this transformation involved several structural changes, affecting economic growth and performance in many markets (with manifest effects in the labour market), as well as international relations with other regions of the world.
In recent years, evaluation and impact assessments (IA) of research and innovation (R&I) policies have become of interest both to researchers and policy makers. The latter use the results of such assessments when developing new regulations and monitoring the implementation and effectiveness of policies already in place. The practice and methodology of policy evaluation and IA are characterised by the diversity of approaches used and the existence of a number of unresolved methodological problems. At the same time, efforts are being made to define conceptual frameworks for policy evaluation and IA, categorise relevant studies and cases, and draft recommendations. This paper looks at public policies and programmes aimed at stimulating R&I in Russian universities. For this purpose, 299 universities were surveyed in 2013-2014 to reveal their demand for the relevant policies in 2006-2012 and the effects they had. Based on survey results we assess the impact of the policies on universities and suggest recommendations regarding the improvement of state regulations and further conduction of similar assessments. JEL Classification: O38.
Using a global panel on research and development (R&D) expenditures, this paper documents that on average poor countries do far less R&D than rich as a share of GDP. This is arguably counter intuitive since the gains from doing the R&D required for technological catch up are thought to be very high and Griffith et al. (2004) have documented that in the OECD returns increase dramatically with distance from the frontier. Exploiting recent advances in instrumental variables in a varying coefficient context we find than the rates of return follow an inverted U: they rise with distance to the frontier and then fall thereafter, potentially turning negative for the poorest countries. The findings are consistent with the importance of factors complementary to R&D, such as education, the quality of scientific infrastructure and the overall functioning of the national innovation system, and the quality of the private sector, which become increasingly weak with distance from the frontier and the absence of which can offset the catch up effect. China’s and India’s explosive growth in R&D investment trajectories in spite of expected low returns may be justified by their importing the complementary factors in the form of multinational corporations who do most of the patentable research.
Economic science has shown that research and development (R&D) and business innovation are key factors for the growth of firms and the development of economies. There is also consensus that greater degrees of trade openness are beneficial for long-term growth of countries. Nonetheless, still there is no evidence about the combined impact of both factors even though the link them would seem obvious in particular for countries with small domestic markets. This article examines the relationship between productivity, expenditure in R&D and exports at a plant level. The results show that firms that actually spend on R&D are considerably more likely to export but the reverse is not true. Moreover, we observe that both R&D and exports have a joint effect on the improvement in productivity in the Chilean plants. These results are of great interest when seeking to improve overall productivity of the country.
There are basically two alternative views to explain declining productivity trends in the EU. The first view blames insufficient knowledge investment while the second view regards over-regulated goods and service markets as a major reason. This paper analysis four policy proposals which could be associated with both views, namely an increase in R&D subsidies, increased high skilled immigration, removal of entry barriers and mark up reductions. Since TFP but not capital deepening is the dominant factor explaining declining productivity growth we base our quantitative on an endogenous growth extension of the Commission's QUEST III model.
Governments often promote inward foreign investment to encourage technology "spillovers" from foreign to domestic firms. Using panel data on Venezuelan plants, we find that foreign equity participation is positively correlated with plant productivity (the "own-plant" effect), but this relationship is only robust for small enterprises. We then test for spillovers from joint ventures to plants with no foreign investment. Foreign investment negatively affects the productivity of domestically owned plants. The net impact of foreign investment, taking into account these two offsetting effects, is quite small. The gains from foreign investment appear to be entirely captured by joint ventures.
Hall (1993b) found that the market value of corporate R&D; relative to ordinary capital investment fell precipitously during the 1980s. The present paper examines this result more closely and finds that it was due both to an increase in the value of ordinary capital and to a steep decline in the absolute value of R&D; assets. The latter was concentrated in the electrical, scientific instruments, electronics, and computing sectors. Firm-level productivity results show that the contribution of R&D; to sales or output growth was low during the 1970s and the first half of the 1980s but has increased recently, except in the electrical industry and in the large firm part of the computing, machinery, metals, and motor vehicle industries. The overall explanation for these findings is that the very substantial restructuring of the manufacturing sector during the 1980s raised the valuation of ordinary capital (and of R&D; capital in the medium-technology sectors). At the same time entry by smaller firms and new technology coupled with a speed-up in product cycles eroded the profits in the electrical and computing sectors, leading to a substantial decline in the valuation of these profits.
This paper presents preliminary estimates of a satellite account on research and development (R&D) for the years 1959-2002 and of the impact that the treatment of R&D as investment would have on Gross Domestic Product (GDP) and Gross Domestic Income (GDI). The satellite account allows BEA to evaluate the effects of changing the asset boundary to include R&D as an intangible asset. It provides estimates of R&D in the economy on a funder basis. Final estimates are scheduled to be released in the fall of 2007. This work lays the ground work for incorporating R&D as an asset into the national income and product accounts, a proposal currently under consideration for the internationally accepted standard for national accounts, the System of National Accounts.
In developed economies, production requires not only such traditional factors as capital and labor but also skills, organizational structures and processes, culture, and other factors collectively referred to as “intangible assets. ” Detailed investigation of some of these types of assets has found that they are often large in magnitude and have important productivity benefits. For example, Dale Jorgenson and Barbara Fraumeni found that the stock of human capital in the U.S. economy dwarfs that of physical capital and has grown markedly over time. 1 Bronwyn Hall, Zvi Griliches, and Baruch Lev and Theodore Sougiannis found evidence that research and development (R&D) assets bring benefits in the form of positive marginal product and market valuation. 2 Timothy Bresnahan, Brynjolfsson, and Hitt have found that certain organizational practices, when combined with investments in information technology (IT), were associated with significant increases in productivity in the late 1980s and early 1990s. 3 Investors also attempt to incorporate intangible assets into their valuation of firms, and this is one reason that the market value of a firm may differ markedly from the value of its tangible assets alone. In particular, stock market valuations of firms have increasingly diverged from their measured book value in the past decade or so. 4 Part of the explanation may be the growing use of IT and the associated investments in intangible
Coe and Helpman presented evidence consistent with the hypothesis that technology spills over across countries through the channel of trade flows, and provided estimates of the magnitude of these spillovers. We re-examine two features of their econometric model. First, we argue that the weighting scheme they used to compute foreign R&D capital stocks is subject to an `aggregation bias'. We suggest an alternative weighting scheme that is theoretically much less biased and that yields somewhat better empirical results. Second, we correct an `indexation bias' and generalise their empirical framework by analysing how the output elasticity of foreign R&D depends on a country's openness to trade. The empirical results confirm that the more open to trade a country is, the more likely it is to benefit from foreign R&D.
Coe and Helpman (1995) and others report positive and equivalent R&D spillovers across G7 countries. We argue that their homogeneity constraint on spillovers across G7 countries is inappropriate, and show that it is rejected by the data. Extending the data set and applying new empirical approaches, we find: (i) R&D spillovers are extremely heterogeneous across G7 countries; (ii) panel estimates do not correspond to country specific estimates and conceal important cross-country differences in knowledge diffusion; and (iii) the US is a net loser in terms of international R&D spillovers. Our interpretation is that when competitors ‘catch-up’ technologically, they challenge US market shares and investments worldwide and this has implications for US productivity.
American business has recently been under fire, charged with inflated pricing and an inability to compete in the international marketplace. However, the evidence presented in this volume shows that the business community has been unfairly malignedâofficial measures of inflation and the standard of living have failed to account for progress in the quality of business equipment and consumer goods. Businesses have actually achieved higher productivity at lower prices, and new goods are lighter, faster, more energy efficient, and more reliable than their predecessors. Robert J. Gordon has written the first full-scale work to treat the extent of quality changes over the entire range of durable goods, from autos to aircraft, computers to compressors, from televisions to tractors. He combines and extends existing methods of measurement, drawing data from industry sources, Consumer Reports, and the venerable Sears catalog. Beyond his important finding that the American economy is more sound than officially recognized, Gordon provides a wealth of anecdotes tracing the postwar history of technological progress. Bolstering his argument that improved quality must be accurately measured, Gordon notes, for example, that today's mid-range personal computers outperform the multimillion-dollar mainframes of the 1970s. This remarkable book will be essential reading for economists and those in the business community.
This paper presents a unified model that integrates the theoretical literatue on Schumpeterian endogenous growth, the microeconometric literature on R&D and productivity, and the empirical literature on productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992, 1998), we provide microeconomic foundations for a reduced-form equation for Total Factor Productivity (TFP) growth that is commonly used in the empirical literature. We allow a role for R&D in innovation and technology transfer (absorptive capacity). The analysis suggests that many existing studies underestimate R&D's social rate of return and provides an explanation for long-run productivity levels at the industry level.
It's taken a long time to confirm that computers boost productivity. But as Nick Bloom, Raffaella Sadun and John Van Reenen show, the key to their success seems to lie in management - and that's where US firms have been far more effective than their European counterparts.
The paper decomposes GDP both in terms of level per capita and growth rate, so as to identify the sources of income differences and of economic growth for all EU27 member states. This accounting approach has multiple advantages, although a number of substantial caveats should be borne in mind when interpreting the results. In particular, the detailed accounting approach helps distinguish exogenous from policy-influenced growth drivers. The combination of lower per-hour productivity and lower labour utilisation is the cause of relatively low per capita GDP in euro area and EU15 countries, while weak productivity remains the main concern in the new member states. GDP growth rate has been broken down into 12 items, including an indicator of labour quality, based upon the composition of employment by educational attainment.
The authors propose a theory of economic development in which technology adoption and barriers to such adoptions are the focus. The size of these barriers differs across countries and time. The larger these barriers, the greater the investment a firm must make to adopt a more advanced technology. The model is calibrated to the U.S. balanced growth observations and the postwar Japanese development miracle. For this calibrated structure, the authors find that the disparity in technology adoption barriers needed to account for the huge observed income disparity across countries is not implausibly large. Copyright 1994 by University of Chicago Press.
This paper analyzes how pharmaceutical research and development (R&D) investment responds to publicly supported biomedical research performed mainly at universities and nonprofit institutions. New microlevel data on investment, by the U.S. National Institutes of Health, allow measures of public basic and clinical research in seven medical classes to be included in a distributed lag model explaining pharmaceutical R&D investment. Using a panel of medical classes observed over 18 years, the analysis found strong evidence that public basic and clinical research are complementary to pharmaceutical R&D investment and thereby stimulate private-industry investment. However, differences in the relevance and degree of scientific and market uncertainty between basic and clinical research lead to differences in the magnitude and timing of the pharmaceutical investment response.
An unanswered question in the debate on public-sector inefficiency is whether reforms other than government divestiture can effectively substitute for privatization. Using a 1981-1995 panel data set of all public and private manufacturing establishments in Indonesia, we analyze whether public-sector inefficiency is primarily due to agency-type problems or to the environment in which public-sector enterprises (PSEs) operate, as measured by the soft budget constraint and the degree of internal and external competition. The results, obtained from fixed-effects specifications, provide support for both models. Ownership matters because, for a given level of government financing or competition, PSEs perform worse than their private-sector counterparts. The environment matters because only PSEs which received government financing or those shielded from import competition or foreign ownership performed worse than private enterprises. The results suggest that the efficiency of PSEs can be increased through privatization, through manipulation of the environment, or through a combination of both approaches. Copyright (c) 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Through a survey, private economic value estimates were obtained on 964 inventions made in the United States and Germany and on which German patent renewal fees were paid to full-term expiration in 1995. A search of subsequent U.S. and German patents yielded counts of citations to those patents. Patents renewed to full-term were significantly more highly cited than patents allowed to expire before their full term. The higher an invention's economic value estimate was, the more the patent was subsequently cited. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
The pace of industrial innovation and growth is shaped by many forces that interact in complicated ways. Profit-maximizing firms pursue new ideas to obtain market power, but the pursuit of the same goal by others means that even successful inventions are eventually superseded by others; this is known as creative destruction. New ideas not only yield new goods but also enrich the stock of knowledge of society and its potential to produce new ideas. To a great extent, this knowledge is nonexcludable, making research and inventions the source of powerful spillovers. The extent of spillovers depends on the rate at which new ideas outdate old ones, i.e., on the endogenous technological obsolescence of ideas, and on the rate at which knowledge diffuses among inventors. In this paper we build a simple model that allows us to organize our search for the empirical strength of the concepts emphasized in the preceding. We then use data on patents and patent citations as empirical counterparts of new ideas and knowledge spillovers, respectively, to estimate the model parameters. We find estimates of the average annual rate of creative destruction in the range of 2-7% for the decade of the 1970s, with rates for individual sectors as high as 25%. For technological obsolescence, we find an increase over the century from about 3% per year to about 12% per year in 1990, with a noticeable plateau in the 1970s. We find the rate of diffusion of knowledge to be quite rapid, with the mean lag between one and two years. Last, we find that the potency of spillovers from old ideas to new knowledge generation (as evidenced by patent citation rates) has been declining over the century; the resulting decline in the effective public stock of knowledge available to new inventors is quite consistent with the observed decline in the average private productivity of research inputs.
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.
This paper considers issues that are of relevance for the design and development of an institutional framework that is conducive to strong economic growth. It entails exploring answers to the following, hitherto not-much-discussed, questions: (1) What institutions are necessary for high-quality growth and development, and what form should they take? (2) How are these institutions acquired? and (3) What is the optimal sequence for implementing institutional reforms? The resolution of these issues is important for a better understanding of the role of institutions in the growth process, and for the formulation of strategies for implementing growth-oriented institutional reforms and/or institutional innovations.
Knowledge flows tend to be highly geographically localized. This has lead researchers to try to find a means through which this localization effect can be minimized. Foreign Direct Investment has been proposed as a possible medium that enhances the ability of nations to exchange knowledge about new ideas. In this paper I use data on more than 1.8 million patents granted in the US and 8.8 million citations belonging to firms of more than thirty countries to determine whether FDI facilitates the flow of knowledge between firms of different nationality. The results indicate a strong positive effect of FDI on knowledge flows. Specifically, I find that on average for all countries in the sample 1) domestic firms are 57% more likely to receive knowledge from foreign firms when the latter are located in the same country. 2) Foreign firms are 78% more likely to receive knowledge from domestic firms when they are located in the same country 3) an extra $1 million in FDI leads to an average of 4% increase in knowledge flows between the investing and the host nations. These results are robust to dropping the US - the country with the largest number of patents in the sample - and to splitting it along economic development lines, and by technological field. I find that Developed Countries' firms can expect to gain knowledge equally well both by locating abroad in countries where intense innovative activity takes place and from MNC subsidiaries that open affiliates in their home country. However, for Newly Industrialized Countries (NIC's), knowledge flows from inward FDI to domestic firms is more than three times as large as that for domestic firms of Developed countries. For NIC's outward FDI, there is no difference between what the home-base can obtain by monitoring the activities of innovating firms abroad from their headquarters at home, and what they can get from their affiliates overseas. Thus, for NIC's it is much more pertinent to try to attract inward FDI than to worry about investing abroad.
This paper examines the relationship between trade patterns and international research-and-development (R&D) spillovers using Kao and Chiang’s (1998) and Kao’s (1999) recently developed panel cointegration techniques. Monte Carlo–type tests demonstrate that the choice of weights used in constructing foreign R&D stocks is informative of the spillover transmission when panel cointegration techniques are employed. However, the evidence does not support a relationship between import patterns and R&D spillovers. The relationship between export patterns and R&D spillovers is then considered. Consistent with recent theoretical models (Ben-David and Loewy 1998), the evidence suggests that exporters receive substantial R&D spillovers from their customers.
Economists have managed to find a positive impact of R&D efforts on productivity. However, the empirical results of their studies have not explained the observed sectoral differences in this important impact. With due reference to three global industries, namely, chemical, computer, and electrical/electronic, the objective of this study is to evaluate the impact of technological opportunity on the productivity of R&D activities. Technological opportunity refers to the ease of achievement of innovations and technical improvements, which could be jointly represented by the intensities of knowledge spillovers, inter-firm research overlap and scope of research. In this study, the degree of technological opportunity is quantified by patent statistics. The empirical findings confirm a positive relationship between technological opportunity and the productivity of R&D effort, and the estimated rate of return falls within the range as reported by past studies.
The set of technological opportunities in a given industry is one of the fundamental determinants of technical advance in that line of business. We examine the concept of technological opportunity and discuss three categories of sources of those opportunities: advances in scientific understanding and technique, technological advances originating in other industries and in other private and governmental institutions, and feedbacks from an industry's own technological advances. Data from the Yale Survey on Industrial Research and Development are used to measure the strength of various sources of technological opportunity and to discern interindustry differences in the importance of these sources. We find that interindustry differences in the strength and sources of technological opportunities contribute importantly to explanations of cross-industry variation in R&D intensity and technological advance.
Imports embodying foreign technology raise output directly as inputs into production and indirectly through reverse engineering. This paper quantifies spillovers from high technology imports to domestic imitation and innovation in developed and developing countries. It then considers the contribution of foreign and domestic innovation to growth in per capita GDP. Patent data from 1965 to 1990 for 75 countries are used to create proxies for imitation and innovation. High technology imports positively affect domestic imitation and innovation. Moreover, their role is greater in developing nations. Finally, foreign technology embodied in imports plays a greater role in growth than domestic technology.
Recent empirical work has examined the extent to which international trade fosters international “spillovers” of technological information. FDI is an alternate, potentially equally important channel for the mediation of such knowledge spillovers. I introduce a framework for measuring international knowledge spillovers at the firm level, and I use this framework to directly test the hypothesis that FDI is a channel of knowledge spillovers for Japanese multinationals undertaking direct investments in the United States. Using an original firm-level panel data set on Japanese firms' FDI and innovative activity, I find evidence that FDI increases the flow of knowledge spillovers both from and to the investing Japanese firms.
I assess the magnitude of human capital spillovers by estimating production functions using a unique firm-worker matched data set. Productivity of plants in cities that experience large increases in the share of college graduates rises more than the productivity of similar plants in cities that experience small increases in the share of college graduates. These productivity gains are offset by increased labor costs. Using three alternative measures of economic distance - input-output flows, technological specialization, and patent citations - I find that within a city, spillovers between industries that are economically close are larger than spillovers between industries that are economically distant.
This paper examines the empirical relationship between technological innovations, market share and stock market value. New
developments in the estimation of dynamic count data models are used to control for unobserved firm specific heterogeneity.
We find a robust and positive effect of market share on observable headcounts of innovations and patents although increased
product market competition in the industry tends to stimulate innovative activity. Furthermore, the impact of innovation on
market value is larger for firms with higher market shares. We argue that our results are consistent with models where high
market share firms have incentives to pre-emptively innovate.
This paper presents new evidence on the practice of industrial Research and Development (R&D), especially the allocation between learning and internal research, and the role of outside knowledge, as represented by R&D spillovers, in reshaping this allocation. The evidence describes the sources of outside knowledge, portrays the flow of that knowledge into firms, and interprets the channels by which outside knowledge influences R&D. The empirical work is based on a sample of 220 R&D laboratories owned by 115 firms in the U.S. chemicals, machinery, electrical equipment, and motor vehicles industries. The findings are consistent with the view that universities and firms generate technological opportunities in R&D laboratories. In addition to partnerships that define rather strict channels of opportunity, the paper uncovers broader effects of R&D spillovers. The results also suggest that academic spillovers drive learning about universities, and that industrial spillovers drive learning about industry. In this way externally derived opportunities reshape the rate and direction of R&D. Overall the findings paint an image of practitioners of industrial R&D reaching aggressively for opportunities, rather than waiting for opportunities to come to them.
Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is not a conventional good or a public good; it is a nonrival, partially excludable good. Because of the noconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that a large population is not sufficient to generate growth. Copyright 1990 by University of Chicago Press.
The compound growth rates per capita output and Farrell-type efficiency measures for 115 market economies over the period 1960-80 were compared with measures of political, civil, and economic li berty. It was found that the institutional framework has significant and large effects on the efficiency and growth rate of economies. Pol itically open societies, which subscribe to the rule of law, to priva te property, and to the market allocation of resources, grow at three times the rate and are two and one-half times as efficient as societ ies in which these freedoms are abridged. Copyright 1988 by University of Chicago Press.
Research intensity, measured by company R & D spending, relates significantly to growth rates of sales, assets, net income, and other variables of sixteen industries performing nearly all manufacturing activity. The relation appears two years after R & D spending and increases thereafter. Research intensity, measured by manpower ratios, relates less effectively. When research intensity ratios include federal R & D funds, correlations with growth rates fall, usually below significance. By eliminating two industries receiving five-sixths of federal funds--aircraft and missiles and electrical equipment--significance emerges between federal R & D intensity and growth rates. Industrial growth appears slowed by excessive allocation of R & D resources to defense-space uses.
Are there productivity spillovers from FDI to domestic firms, and, if so, how much should host countries be willing to pay to attract FDI? To examine these questions, we use a plant-level panel covering U.K. manufacturing from 1973 through 1992. Consistent with spillovers, we estimate a robust and significantly positive correlation between a domestic plant's TFP and the foreign-affiliate share of activity in that plant's industry. Typical estimates suggest that a 10-percentage-point increase in foreign presence in a U.K. industry raises the TFP of that industry's domestic plants by about 0.5%. We also use these estimates to calculate the per-job value of these spillovers at about £2,400 in 2000 prices ($4,300). These calculated values appear to be less than per-job incentives governments have granted in recent high-profile cases, in some cases several times less. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Knowledge flows within and across countries may have important consequences for both productivity and innovation. We use data on 1.5 million patents and 4.5 million citations to estimate knowledge flows at the frontier of technology across 147 subnational regions during 1975-1996 within the frame of a gravity-like equation. We estimate that only 20% of average knowledge is learned outside the average region of origin, and only 9% is learned outside the country of origin. However, knowledge in the computer sector flows substantially farther, as does knowledge generated by technological leaders. In comparison with trade flows, we see that knowledge flows reach much farther. External accessible R&D gained through these flows has a strong positive effect on innovative activity for a panel of 113 European and North American regions over 22 years. Copyright (c) 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
This paper studies the influence of R&D in the U.S. federal laboratory system, the world's largest, on firm research. Our results are based on a sample of 220 industrial research laboratories that work with a variety of federal laboratories and agencies and are owned by 115 firms in the chemicals, machinery, electrical equipment, and motor vehicles industries. Using an indicator of their importance to R&D managers, we find that cooperative research and development agreements (CRADAs) dominate other channels of technology transfer from federal laboratories to firms. With a CRADA industry laboratories patent more, spend more on company-financed R&D, and devote more resources to their federal counterparts. Without this influence, patenting stays about the same, and only federally funded R&D increases, mostly because of government support. The Stevenson-Wydler Act and amendments during the 1980s introduced CRADAs, which legally bind federal laboratories and firms together in joint research. In theory the agreements could capitalize on complementarities between public and private research. Our results support this perspective and suggest that CRADAs may be more beneficial to firms than other interactions with federal laboratories, precisely because of the mutual effort that they demand from both parties. Copyright (c) 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Using panel data on Indian firms from 1974-75 to 1981-82, the authors provide estimates of the impact on output of Indian firms' R&D expenditures, their technology purchases, and international and domestic R&D spillovers. The private returns to technology purchases are estimated to be high and statistically significant, while the private returns to firms' own R&D expenditures are somewhat lower and are often insignificant. There is evidence of both international and domestic R&D spillovers. The estimates permit estimation of total factor productivity growth in the period preceding India's industrial liberalization policies. Copyright 1996 by MIT Press.
The effect of R50D expenditure data than widely used data based on financial statements, series of R50D investment is estimated. In addition, the impact of other industries' R$50D on the productivity growth of an industry is also estimated. An attempt is made to determine the effect of electronics technology upon the productivity growth of other industries through the transaction of the intermediate electronics goods with improved quality, and through the diffusion of the new technological knowledge discovered. Japanese Technology Trade 1977-1981 Copyright 1989 by MIT Press.
The effects of technological opportunity, market demand and R&D spillovers on R&D intensity and productivity growth are quantified. It is shown that all three factors have significant effects on R&D demand; with respect to productivity growth, it is not possible to distinguish demand and technological opportunity effects, but spillovers are important.