From R&D to Productivity Growth: Do the Institutional Settings and the Source of Funds of R&D Matter?

This paper presents estimates of the long-term impact of various sources of knowledge (R&D performed by the business sector, the public sector and foreign firms) on multifactor productivity growth of 16 countries from 1980 to 1998. The main results show that the three sources of knowledge are significant determinants of long-term productivity growth. Further evidence suggests that several factors determine the extent to which each source of knowledge contributes to productivity growth. These factors are the absorptive capability, the origin of funding, the socioeconomic objectives of government support, and the type of public institutions that perform R&D.     

Technological spillovers and productivity in Italian manufacturing firms

We study whether a firm’s total factor productivity dynamics is positively influenced by its own R&D activity and by the technological spillovers generated at the intra- and inter-sectorial level. Our approach corrects simultaneously for the endogeneity and the selectivity biases introduced by the use of a firm’s own R&D as a regressor. The evidence suggests that a firm’s involvement in R&D activities accounts for significant productivity gains. Firms also benefit from spillovers originating from their own industries, as well as from innovative upstream sectors.     

Knowledge Spillovers,ICT and Productivity Growth

This paper looks at the channels through which intangible assets affect productivity growth. The econometric analysis exploits a new data set on intangible investment (INTAN‐Invest) in conjunction with EUKLEMS productivity estimates for 10 EU member states from 1998 to 2007. We find that (a) the output elasticity of intangible capital depends upon ICT intensity, consistent with complementarities between ICT and intangible capital; (b) non‐R&D intangible capital has a higher estimated output elasticity than its factor share, as does (c) an index of labour composition. The last two findings are consistent with growth spillovers from investments in knowledge‐based/intangible capital and skills.     

Economic conditions for innovation: Private vs. public sector

The Hicks induced innovation hypothesis states that a price increase of a production factor is a spur to invention. We propose an alternative hypothesis restating that a spur to invention requires not only an increase of one factor but also a decrease of at least one other factor to offset the companies’ cost. We illustrate the need for our alternative hypothesis in a historical example of the industrial revolution in the United Kingdom. Furthermore, we econometrically evaluate both hypotheses in a case study of research and development (R&D) in 29 OECD countries from 2003 to 2017. Specifically, we investigate the dependence of investments to R&D on the economic environment represented by average wages and oil prices using panel regression. We find that our alternative hypothesis is supported for R&D funded and/or performed by business enterprises while the original Hicks hypothesis holds for R&D funded by the government and R&D performed by universities. Our results reflect that the business sector is significantly influenced by market conditions, unlike the government and higher education sectors.     

Spillovers,Linkages and Technical Change

Using US input–output data for the period 1958–87, I find strong evidence that industry total factor productivity (TFP) growth is significantly related to the TFP performance of the supplying sectors, with an elasticity of almost 60%. R&D intensity is also found to be a significant determinant of industry TFP growth, with an estimated return of about 10–13% and the return to embodied R&D is estimated at 43%. Direct productivity spillovers, from the technological progress made by supplying sectors, appear to be more important than spillovers from the R&D performed by suppliers. They also play a key role in explaining changes in manufacturing TFP growth over time. Changes in the contribution made by direct productivity spillovers to TFP growth account for almost half of the slowdown in TFP growth in manufacturing from 1958–67 to 1967–77, and for 20% of the TFP growth recovery in this sector from 1967–77 to 1977–87. Changes in R&D intensity and embodied R&D are relatively unimportant in explaining movements in manufacturing TFP growth over these three periods.     

Finland and the mobile phone industry: A case study of the return on investment from government-funded research and development

The sudden and dramatic growth of the mobile phone manufacturing sector in Finland is an interesting case study for science and technology (S&T) policy analysts. Mostly on account of the rapidity of this growth against a relatively static situation for the other sub-sectors, the Finnish economic data over the period 1990–2001 can be used without ambiguity to quantify the return of an initial public sector research and development (R&D) expenditure on the growth of a sectoral economy. Although it is apparent from the data that this economic success story is to some extent now running out of steam, the returns to date for all the participants have been astonishing. Using the Patterson–Hartmann model, which has been developed to link company-level R&D expenditure with product revenue, it is shown that government has managed to achieve a multiplier effect of about 66 on its initial R&D expenditure through initially a leveraging of business R&D expenditure (at a level of 1:3) and then the translation of the latter into an increase in gross domestic product (GDP) (at a level of 1:22). These figures are extraordinarily high, even in comparison to the multipliers obtained by large private sector companies.The keys to the success were both the vision and foresight of the Finnish R&D community, who identified cell phones as a major growth opportunity, the sharing of risk by the various role players (government, universities and industry) as can happen in an efficient national system of innovation, and finally a sustained commitment to R&D by the industry leaders. The latter has now reached a level of 3.5% of GDP (2005), which makes Finland a global leader in R&D expenditure (as a percentage of GDP). The lessons for developing countries such as South Africa, which are moving towards higher levels of R&D expenditure but within a resource constrained context, are apparent.     

R&D,Interindustry and International Technology Spillovers and the Total Factor Productivity Growth of Manufacturing Industries in Canada, 1974-1989

The paper presents new econometric evidence on the relationship between total factor productivity growth and the R&D expenditures of Canadian manufacturing industries in the presence of interindustry and international spillovers of technology. In contrast to studies that presume that international spillovers are incorporated in imports of intermediate and/or capital equipment goods, the present paper assumes that the principal channel of transmission of new technology is foreign direct investment. Three original proxies for international spillovers use information on patenting, the size and the origin of foreign ownership in the host country and the R&D expenditures in the country of origin. The results suggest that the nexus between industry's own R&D expenditures and the TFP growth is significant and positive, especially for the process-related R&D. Domestic interindustry spillovers of new technology have a larger effect on TFP than industry's own R&D expenditures. All three proxies for international technology spillovers are associated positively and significantly with TFP growth. However, international spillovers contribute to TFP growth less than domestic interindustry spillovers and less than own process-related R&D.     

Environmental regulations in private and mixed duopolies: Taxes on emissions versus green R&D subsidies

In this article, we compare two kinds of environmental regulations—emissions taxes and green R&D subsidies—in private and mixed-duopoly markets in the presence of R&D spillovers. We show that a green R&D subsidy is better (worse) than an emissions tax when the green R&D is efficient (inefficient), irrespective of R&D spillovers, whereas the existence of a publicly owned firm encourages the government to adopt a subsidy policy. We also show that the optimal policy choice depends on R&D efficiency and spillovers. In particular, when green R&D is inefficient and the spillover rate is low (high), the government should choose an emissions tax and (not) privatize the state-owned firm. When green R&D is efficient, however, an R&D subsidy is better, but a privatization policy is not desirable for society, irrespective of spillovers.     

How do firm characteristics affect behavioural additionalities of public R&D subsidies? Evidence for the Austrian transport sector

Interest of STI policies to influence the innovation behaviour of firms has been increased considerably. This gives rise to the notion of behavioural additionality, broadening traditional evaluation concepts of input and output additionality. Though there is empirical work measuring behavioural additionalities, we know little about what role distinct firm characteristics play for their occurrence. The objective is to estimate how distinct firm characteristics influence the realisation of behavioural additionalities. We use survey data on 155 firms, considering the behavioural additionalities stimulated by the Austrian R&D funding scheme in the field of intelligent transport systems in 2006. We focus on three different forms of behavioural additionality—project additionality, scale additionality and cooperation additionality—and employ binary regression models to address this question. Results indicate that R&D related firm characteristics significantly affect the realisation of behavioural additionality. R&D intensive firms are less likely to substantiate behavioural additionalities, while small, young and technologically specialised firms more likely realise behavioural additionalities. From a policy perspective, it may be concluded that direct R&D promotion of firms with a high R&D intensity may be misallocated. Attention of public support should be shifted to smaller, technologically specialised firms with lower R&D experience. The findings deliver important insights into interactions of public R&D support and R&D behaviour of firms operating in the Austrian transport sector, bearing significant implications for future policy designs.     

Building the Knowledge Stock: Lags,Depreciation, and Uncertainty in R&D Investment and Link with Productivity Growth

The search for an appropriate methodology to investigate the relation between R&D investment, knowledge stock and productivity growth is the main purpose of the paper. In analogy with physical assets, we present a model of knowledge capital formation which allows the calculation of the relevant user cost, as well. The proposed model accumulates R&D investment based on a stochastic gestation lag and a geometric depreciation of the stock. The basic parameters underlying the lag structure differ according to the types of research expenditure. The approach is applied to public R&D investment in Italian agriculture; the results provide interesting information about the economic structure of public research effort in Italian agriculture and plausible estimates of its internal rate of return.     

Imputed Interindustry Technology Flows - A Comparative SMFA Analysis

This paper shows how the pattern of an interindustry R&D flow system can be detected using a Subsystem-MFA (SMFA). The standard subsystem analysis shows the innovation spillovers of the relevant innovative sectors of a country, which are then turned into graphical form so that the sector clustering into this system can be displayed like a 'molecule' of sectors. The analysis uses the recently published input-output tables of the OECD for Germany, Japan and the United States for the beginning, the middle and the end of the 1980s. The analysis uses R&D-expenditures as an innovation-indicatorvector, published also by the OECD. The results show that there are specific patterns of interindustry imputed R&D flows that differ to some extent between the given countries. These differences can be interpreted as being due to the specific economic history of these countries.     

Environmental Determinants of Public Sector Innovation: A study of innovation awards in Canada

Abstract

In this article, we conduct an empirical study of administrative innovation in the Canadian public sector by examining applications to the Innovative Management Award of the Institute of Public Administration of Canada (IPAC). After a review of the literature on innovation in the public sector and of the history of this award, we come to the conclusion that the relationship between innovation and environment has been studied only sparingly, which explains the focus of our research and our hypotheses. Through an analysis of award applications over 21 years, and of award finalists and winners, we demonstrate that such environmental variables as strength of the economy, size of the civil service, deficits, unemployment rate, investment in R&D, and type of government have important consequences for administrative innovation in the public sector. We also suggest some implications of our findings for future research on this subject.     

Intangible investment in people and productivity

Organizational activity, information and communication technology work, and research and development (R&D) can be classified as work that creates intangible capital. We measure the returns to these three types of labor input by accounting for differences in their productivity compared with other labor inputs using Finnish firm-level data from 1998 to 2008. We apply a novel idea to use hiring as one proxy for productivity and demand shocks. We find that organizational workers increase total factor productivity and improve the profitability of high-productivity firms. R&D workers account for a large share of intangible capital; however, the returns to R&D are low. Investments in organizational competence are more likely to result in more rapid productivity growth. Firms with performance-related pay or domestically owned firms with extensive foreign activities have been among the highest performers with respect to the use of organizational work.     

Governance and effects of public R&D subsidies: Evidence from China

This study examines the effects of public research and development (R&D) subsidies and the governance of such subsidies on firm productivity based on the analysis of a firm-level panel dataset between 1998 and 2007 in China. It is found that public R&D subsidies tend to support more productive firms and the productivity of these government-backed firms is improved further after they get the government support. Less attention is paid to the observable or measurable performance measurements in ex-ante project selection, and the ex-post effects are stronger when the governance of the public R&D subsidies becomes more decentralized due to an exogenous policy change. In other words, better decentralization of governance is associated with more pronounced effects of R&D subsidies. Identification concerns are addressed with various approaches to confirm the treatment effect of public R&D subsidies and the governance of such subsidies.     

Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors

The main objective of this study is to investigate the impact of corporate research and development (R&D) activities on firm performance, measured by labour productivity. To this end, the stochastic frontier technique is used on a unique unbalanced longitudinal dataset comprising top European R&D investors over the period 2000–2005. In this framework, this study quantifies technical inefficiency of individual firms. From a policy perspective, the results of this study suggest that if the aim is to leverage firms’ productivity, the emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. On the other hand, corporate R&D in the low-tech sector is found to have a minor effect in explaining productivity. Instead, encouraging investment in fixed assets appears important for the productivity of low-tech industries. Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an ‘erga omnes’ approach across all sectors appears inappropriate. However, with regard to technical efficiency, R&D intensity is found to be a pivotal factor in explaining firm efficiency and this turns out to be true for all industries.     

R&D subsidies and productivity in eastern European countries

This paper shows that R&D subsidy policies at the European Union (EU) and national levels stimulated labor productivity in Central and Eastern European countries (CEEC) in the years after their entry to the EU. However, the average impact of national funding on labor productivity was higher for countries in the Western control group than in the CEEC sample. EU R&D subsidies compensated the CEEC in part for the greater innovation impact of Western economies. Although they crowded out some R&D subsidies by local governments at the country level, the EU subsidies crowded in many national and local subsidies at the firm level. Local/regional state innovation aid to enterprises encouraged no increase in labor productivity in all but one of the sample CEEC countries. These impacts are assessed in a sequential structural econometric model estimated using Eurostat’s collection of Community Innovation Surveys covering the years 2006–2014.     

The R&D knowledge base in city-agglomerations and knowledge searching in product innovative SMEs

ABSTRACT

This paper looks at the relation between the R&D knowledge base of city-agglomerations and knowledge sourcing in product innovative small and medium-sized enterprises (SMEs). The small open Belgian economy is used as a test case. The characteristics of the city-agglomeration’s R&D knowledge are posited to be instrumental for SMEs’ reliance on particular sources of information for innovation. The R&D knowledge base is studied as a multidimensional concept consisting of R&D capacity, R&D specialization and R&D diversification. A representative sample of product innovative SMEs drawn from two waves of the Community Innovation Survey between 2008 and 2012 reveals that a strong R&D capacity at city-agglomeration level favours private external information sources for innovation, but has no influence on the likelihood to rely on public sources for innovation. Accordance between specialization of the private R&D knowledge base and the SME’s activities positively influences the use of clients as information sources for innovation, whereas under these circumstances supplier responsiveness turns out to be less frequently solicited for. A more diversified private R&D environment reduces the reliance on universities and public research organizations as information sources for innovation. A public R&D knowledge base specialized in natural sciences or engineering favours information sources from universities.     

Interindustry R&D Spillovers for Electrical and Electronic Products: The Canadian Case

This paper estimates the effects of interindustry R&D spillovers on the cost and production structure for 10 Canadian manufacturing industries. Because of their high-tech nature and productivity performance, spillovers from electrical and electronic products are distinguished from other spillover sources. Generally, spillovers from electrical and electronic products generate cost reductions and render production processes for Canadian manufacturing industries more capital intensive (i.e. either more physical or R&D capital intensive). Social rates of return for R&D capital are calculated for all 10 industries. The social rates are 5–11 times greater than are the private rates. Indeed, the social rates are high for all the industries. This implies that the electrical and electronic products industry is an important interindustry spillover source but, like other industries, a major spillover-using industry.     

Spillovers,absorptive capacity and agglomeration

I study knowledge spillovers in an industry where firms are heterogeneous in their ability to adopt knowledge (absorptive capacity). I set up a model in which firms choose locations anticipating potential gains and losses from other firms’ R&D activity. I apply the model to the US software industry and obtain the following results: the data supports localized knowledge spillovers; firms that have higher absorptive capacity are sorted into more agglomerated counties; ignoring firm heterogeneity leads to biased estimates of gains from spillovers; spillovers play an important role in explaining the geographic distribution of firms, but only within regions with high R&D activity.     

Contributions and Channels of Interindustry R&D Spillovers: An Estimation for Japanese High-tech Industries

This paper estimates the contributions of R&D spillovers to four high-tech industries in Japan—general machinery, electrical machinery, transportation machinery and chemicals—by estimating the trans-log cost and share functions that include the R&D stock variables of own and spillover-source industries. The candidates for spillover- source industries are selected on the basis of large R&D flow or R&D proximity. The R&D flow measures the spillover embodied in purchased intermediate goods using input–output coefficients. The R&D proximity measures the extent of similarity between a pair of industries of the distribution of R&D expenditures across research fields, and is expected to show the likelihood of spillover at the R&D stage. The results suggest that electrical machinery benefited from R&D in the chemical industry, through the purchase of intermediate goods, whereas general machinery and transportation machinery benefited from R&D in the metal products industry, through R&D proximity. There was no evidence of the chemical industry benefiting from R&D spillovers. These results clearly imply that the contributions and the channels of R&D spillovers are diverse, casting doubt on earlier studies that used weighted sums of R&D expenditures (or their stocks) of other industries as aggregate spillover variables.