Impact of R&D and Technology Diffusion on Productivity Growth: Empirical Evidence for 10 OECD Countries

This paper examines the empirical evidence on the impact of performed R&D and of R&D embodied in intermediate and capital goods on productivity performance in 10 major OECD countries over the last two decades. To quantify intersectoral and international technology flows, industry-level embodied R&D variables were constructed from an input–output (IO) R&D embodiment model. The productivity variables used are discrete Divisia growth indexes of total factor productivity (TFP), which were estimated from an IO growth accounting model. The results from pooled regressions indicate that the rates of return of the R&D variables were positively significant and increasing in the 1980s. In particular, embodied R&D is an important source for TFP growth in services, indicating very high social returns of the flows of capital-embodied technology into this sector. Moreover, the information and communi-cation technology (ICT) cluster of industries played a major role in the generation and cquisition of new technologies at the international level.     

Industrial Productivity Growth Linkages Between OECD Countries, 1970–90

Technology ‘spillovers’ are increasingly being recognized as sources of productivity growth. International ‘convergence’ in productivity levels has also been noted in recent studies. This paper reports a study of international total factor productivity (TFP) growth for 11 industrial sectors in seven OECD countries. Spillover variables are defined based on interindusty and international invention input–output (I(IO)) weights. These variables are tested against import-weighted variables. The study concludes that I(IO)-weighted R&D ‘spill-ins’ are important determinants of TFP growth and that convergence is dependent on domestic RBD.     

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.     

Interindustry Technology Flows and Productivity in Finnish Manufacturing

The paper examines the importance of interindustry technology flows in finnish manufacturing in the 1980s and early 1990s. An attempt is made to distinguish between embodied technology flows and spillovers, so clarifying the spillover concept.Embodied technology covers intermediate goods and capital equipment. The embodied technology data that have been used are partly based on input—output analysis, while the spillover estimates presented are based on measures of technological distance based on the industry-specific distributions of R&D expenditures. Econometric analysis of the effects of the various technology inputs on total factor productivity implies that technology embodied in foreign machinery, domestic spillovers and, to some extent, the firms' own R&D have been the most important technology sources on average.     

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.     

Corporate cash holdings and total factor productivity – A global analysis

Studies concerning total factor productivity (TFP) have investigated the effect of TFP on economic growth from a country-level perspective, which is a critical issue in the macroeconomics field. Few studies have examined how corporate financial decisions influence TFP from a firm-level perspective. Specifically, no extant studies have investigated how cash holdings affect firm productivity. This study utilizes data for firms in 65 countries during 1993–2017 to investigate the effect of cash holdings on TFP from a corporate perspective. The findings show that firms with higher cash holdings can enhance TFP. The results hold after considering endogenous problems, financial constraints, financial crises, corporate governance, institutional quality, and financial development as well as various robustness tests. Furthermore, we examine whether firms consistently invest their cash holdings into research and development (R&D) expenditures enhances firm productivity. The evidence indicates that higher cash holdings lead to steady increases in R&D expenditure, which improves firms’ TFP.     

R&D and productivity: A broad cross-section cross-country look

The empirical literature on R&D and productivity has shown that there is indeed a positive influence of R&D investment on output growth. However, the exact relation depends to a large extent on the approach chosen (i.e., functional form). Because most studies concentrate on a limited number of countries or sectors and use their own specific methodology, comparison is difficult. This paper aims at providing a broad overview of cross-country and cross-sector differences in the relation between (direct) R&D and output growth, using a common methodology, so that comparison is easier. The functional form used is a translog production function, which is applied to data for 15 manufacturing sectors and 9 principal OECD countries.     

Technological Opportunity and Productivity of R&D Activities

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.     

Measuring Intersectoral Spillovers: French Evidence

In this paper, we measure the effect of internal R&D and various spillover concepts on productivity growth, using a database for France that covers the period 1978–92. Three spillover concepts are distinguished: rent spillovers related to investment goods; rent spillovers related to intermediate goods; pure knowledge spillovers. When production is measured by gross output, all three spillover concepts yield positive and statistically significant coefficients. Each concept has a measurable effect on technological progress at the sectoral level.     

The impact of R&D on factor-augmenting technical change – an empirical assessment at the sector level*

The aim of the paper is to quantify endogenous factor-augmenting technical change driven by R&D investments in a panel of 11 OECD countries over 1987–2007. This paper contributes to the scant empirical evidence on the speed, sources and direction of technical change for various sectors and production factors. Assuming cost-minimization behavior, a CES framework is used to derive a system of equations that is estimated by a GMM system estimator. The estimated factor-augmenting technology parameters show that in most sectors, technical change was labor-augmenting and labor-saving. Statistically significant effects of manufacturing and services R&D were found on factor-augmenting technical change (with the highest R&D elasticities found in the high-tech manufacturing and transport, storage and communication sectors). Whereas ‘in-house’ R&D stimulates total factor productivity, R&D spilled over to other sectors has a capital-augmenting effect accompanied by a higher use of labor. The results of this study provide a starting point for incorporating endogenous factor-augmenting technical change in impact assessment models aimed at broad policy analysis including economic growth, food security or climate change.     

Issues in Assessing the Effect of Interindustry R&D Spillovers

This paper aims to clarify three issues concerning the weighting methodol ogy generally used to evaluate interindustry R&D spillovers. These issues concern the likely nature of the spillovers estimated through different types of supporting matrices; the similarity between input–output (IO), technology flows and technological proximity matrices; and the relevance of the assumption that a single matrix can be used for different countries. Data analyses of weighting components show that technology flows matrices are in an intermediate position between IO matrices and technological proximity matrices, but closer to the former. The various IO matrices, as well as the three technological proximity matrices, are very similar to each other. The panel data estimates of the effect of different types of interindustry R&D spillovers on industrial productivity growth in the G7 countries reject the hypotheses that a technology flows matrix can be approximated by an IO matrix and that a single IO matrix can be usedfor different countries. By transitivity, the procedure that comprises using a single technology flow for several countries is not reliable. The international comparison shows that each country benefits from different types of R&D externality. In Japan and, to a lesser extent, in the US, the rate of return to direct R&D is very high and is likely to compensate for relatively weak interindustry R&D spillover effects. In the five other industrialized countries, the reverse observation is true: strong social rates of return to R&D counterbal ance the poor performances of direct 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.     

MEASURING INTERSECTORAL KNOWLEDGE SPILLOVERS: AN APPLICATION OF SENSITIVITY ANALYSIS TO ITALY

R&D spillovers are unanimously considered as one of the main driving forces of technical change, innovation and economic growth. This paper aims at measuring interindustry R&D spillovers. We apply an ‘uncertainty-sensitivity analysis’ to the Italian input–output table of intermediate goods split into 31 economic sectors for the year 2000. The value added of using this methodology is the opportunity of distinguishing between spillover effects induced by productive linkages (the Leontief forward multipliers) and those activated by R&D investments, capturing the uncertain and non-linear nature of the relations between spillovers and factors affecting them.     

Explaining Total Factor Productivity at Firm Level in Italy: Does Location Matter?

Abstract

This study analyses how firms' internal variables and regional factors affect total factor productivity (TFP) of Italian manufacturing firms. Due to the hierarchical structure of our data, we employ a multilevel model that allows for a clear distinction between firm and region-specific effects. Results refer to 2004–2006 and show, as expected, the importance of firm-specific determinants of TFP. At the same time, they indicate that location matters in the sense that the context where firms operate plays a crucial role in determining the level of TFP. In more detail, we find that the regional endowment of infrastructure, the efficiency of local administration and the investments in R&D exert a positive effect on firms' performance.     

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.     

Trade and product innovations as sources for productivity increases: an empirical analysis

Increases in total factor productivity (TFP) are commonly associated with technological innovations measured by the stock of R&D. Empirical evidence seems to corroborate this relationship. However, in trading countries like The Netherlands, productivity increases, even in industry, can also be the result of innovations in the way transactions are managed. These innovations reduce transaction costs and exploit the welfare gains from (further) international division of labour. Such innovations are only partly included in R&D data. Consequently there is not much attention for these ‘trade innovations’—as we label them—in policy. In an empirical analysis this paper compares the influence of trade innovations with the influence of the stock of R&D on TFP in The Netherlands. The regression results show that in this country trade innovations are as important for TFP as technological innovations which directly affect the efficiency of production, which we label ‘product innovations’.      

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.     

International R&D Spillovers: An Application of Estimation and Inference in Panel Cointegration

In this paper, we apply the asymptotic theory of panel cointegration developed by Kao and Chiang (1998) to Coe and Helpman's (1995) international R&D spillovers regression. The OLS with bias-correction, the fully-modified (FM) and the dynamic OLS (DOLS) estimations produce different predictions about the impact of foreign R&D on total factor productivity (TFP) although all the estimations support the result that domestic R&D is related to TFP.     

Productivity Spillovers Across Countries and Industries: New Evidence From OECD Countries

This paper uses a translog approach to estimate intra‐ and inter‐industry productivity spillovers transmitted through input–output linkages, distinguishing R&D and other (remainder) spillovers. For a panel of 12 OECD countries and 15 manufacturing industries from 1995–2005, first, we find that the estimated elasticity with respect to ‘own’ R&D amounts to 0.25 on average (which would be estimated to be lower if R&D were assumed to be additively separable from other inputs). Second, there are sizeable intra‐industry and relatively small inter‐industry R&D spillovers. Third, there are significant remainder spillovers, which are mainly of the intra‐industry type and substantially amplify idiosyncratic technology shocks.     

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.