International R&D spillovers and institutions

The empirical analysis in “International R&D Spillovers” [Coe, D., Helpman, E., 1995. International R&D Spillovers. European Economic Review, 39, 859-887] is first revisited on an expanded data set that we have constructed for the purpose of this study. The new estimates confirm the key results reported in Coe and Helpman about the impact of domestic and foreign R&D capital stocks on TFP. In addition, we show that domestic and foreign R&D capital stocks have measurable impacts on TFP even after controlling for the impact of human capital. Furthermore, we extend the analysis to include institutional variables. Our results suggest that institutional differences are important determinants of TFP and that they impact the degree of R&D spillovers. Countries where the ease of doing business and the quality of tertiary education systems are relatively high tend to benefit more from their own R&D efforts, from international R&D spillovers, and from human capital formation. Strong patent protection is associated with higher levels of total factor productivity, higher returns to domestic R&D, and larger international R&D spillovers. Finally, countries whose legal systems are based on French and, to a lesser extent, Scandinavian law benefit less from their own and foreign R&D capital than countries whose legal origins are based on English or German law.     

The two ways of FDI R&D spillovers: evidence from the French manufacturing industry

Using French firm-level panel data, this study investigates R&D spillovers from inward foreign direct investment (FDI) with respect to both horizontal and vertical linkages (backward and forward). Using a Crepon, Duguet and Mairesse (CDM) model, we estimate an R&D-augmented Cobb–Douglas production function to assess the impact of R&D spillovers on firm performance. The results emphasize that international spillovers (from foreign affiliates to local firms) have a greater effect on firm performance than reverse spillovers (from local firms to foreign affiliates) and are more likely to be backward than forward. Moreover, the effect of backward spillovers depends on a firm’s absorptive capacity and is amplified in the case of outsourcing relationships.     

How R&;D investments influence TFP growth: Evidence from China’s large and medium-sized industrial enterprises

This paper investigates the potential channels through which R&D may influence TFP growth using industry-level panel data of China’s large and medium-sized industrial enterprises over the period of 2000–2007. Comparing with existing literature, we provide a closer look of the relationship between R&D and TFP growth by decomposing TFP growth into efficiency change and technical change components using Malmquist productivity index and distinguishing between upstream R&D spillovers and downstream R&D spillovers. We find TFP grow slightly during 2000–2007, and R&D investment indeed serves as an engine of productivity growth just as endogenous growth theories argued, which is largely because R&D accelerates technical progress even it also results in enlarging technical inefficiency. However, we find a robust negative effect of downstream R&D spillovers on TFP growth, the effects of upstream is positive but not statistically significant. In addition, we do not find the positive effects of human capital on TFP as endogenous growth theories indicated, but find human capital severs as “assimilation device” for R&D spillovers both in promoting TFP growth and increasing technical efficiency even the effects on technical progress is adverse.     

International Transmission of Technology and Trade: The Role of Cross-country Heterogeneity

In the framework where the channel of international transmission of technology is trade in intermediate inputs, this paper investigates the role of heterogeneities across countries. In particular, this paper analyzes how cross-country differences in production structure, national innovative capacity, and absorptive capacity affect the scope and magnitude of international R&D spillovers on productivity. The study is based on the industry-level data set that covers eight OECD countries from 1970 to 1995. It finds that accounting for cross-country differences in each of production structure (using country-specific input–output relations) and national innovative capacity (using patents granted per R&D investment) yields significantly different spillover effects than previous studies. This suggests that the effect of international R&D spillovers depends on both production structure and the pattern of international trade. Further, it finds the absorptive capacity of a country is positively related to spillovers.     

R&D spillover effects on firms’ export behavior: evidence from South Korea

This paper investigates the spillover effects of R&D investments made by foreign multinational enterprises (MNEs) and domestic firms on their export activities, using a manufacturing firm-level panel dataset from South Korea. The theoretical framework predicts two conflicting spillover effects: positive technology spillovers and negative market rivalry spillovers. Thus, the net spillover effect is determined by the relative degree of the two conflicting spillovers. The empirical results show that negative intra-industry spillovers exist from the R&D of foreign MNEs on the export performance of firms, which implies that, in general, negative market rivalry spillovers dominate positive technology spillovers. However, notably, in the case of firms equipped with absorptive capacity, the negative spillovers can be alleviated; firms can gain positive spillovers by muting negative ones. Firms without absorptive capacity cannot avoid such negative effects. This paper shows that absorptive capacity is vital in capturing positive spillovers as firms build competency by accumulating their own know-how and improving their ability to capture better external technologies.     

A model of innovation and learning with involuntary spillovers and absorptive capacity

We develop a model of innovation and learning that incorporates explicitly the need for a firm to conduct its own research and development (R&D) in order to realize involuntary spillovers from other firms’ R&D activity and the development of absorptive capacity of research firms over time. The conclusions of the model follow directly from the functional forms that are used to describe the generation and absorption of technological knowledge. The first proposition formally characterizes the steady-state rate of growth of technology for the model. The analysis also shows how some of the key features of two distinct, pure modes of organization of the production of new knowledge, the R&D model and the new localized knowledge model, are implied by our model by simply drastically changing the relative magnitude of two exogenous parameters: the ease of learning and the pace of knowledge advance. The second proposition formally characterizes the connections implied by the model between involuntary spillovers and absorptive capacity. Analysis of the long-term interactions between involuntary spillovers of knowledge and absorptive capacity provides the essential insights into an understanding of the elements of a self-sustained process of endogenous growth. The third and last formal proposition of this paper accommodates firm-level arguments and the crucial role of a firm's absorptive capacity in taking advantage of its location in clusters, as implied by the theoretical model.     

Engines of growth in the US economy

There is good reason to believe that R&D influences on TFP growth in other sectors are indirect. For R&D to spill over, it must first be successful in the home sector. Indeed, observed spillovers conform better to TFP growth than to R&D in the upstream sectors. Sectoral TFP growth rates are thus inter-related. Solving the intersectoral TFP equation resolves overall TFP growth into sources of growth. The solution essentially eliminates the spillovers and amounts to a novel decomposition of TFP growth. The top 10 sectors are designated ‘engines of growth’ led by computers and office machinery. The results are contrasted with the standard, Domar decomposition of TFP growth.     

Knowledge spillovers,absorptive capacity and total factor productivity in China’s manufacturing firms

Applying the stochastic frontier framework, this study explores the diffusion and absorption of technological knowledge in China’s manufacturing firms, based on a panel of more than 10,000 local and foreign-invested firms over the period 1998–2001. Our empirical approach allows us to distinguish between technological progress (TP) and technical efficiency (TE) in analysing whether R&D, exports and the presence of foreign direct investment simultaneously enhance TP through knowledge spillovers in a single framework and whether different types of domestic absorptive capacity moderate external knowledge spillovers in relation to TE. The results show that there are positive inter-industry productivity spillovers from R&D and foreign presence, whereas evidence of intra-industry productivity spillovers from FDI to Chinese firms is less robust. We find evidence that absorptive capacity is one of the key determinants to quantitatively explain intra-industry differences in productivity of local Chinese firms. The findings have important policy implications.     

ChinHow R&D Investments Influence TFP Growth: Evidence from China’s Large and Medium- Sized Industrial Enterprises

This paper investigates the potential channels through which R&D may influence TFP growth using industry-level panel data of China’s large and medium-sized industrial enterprises over the period of 2000–2007. Comparing with existing literature, we provide a closer look of the relationship between R&D and TFP growth by decomposing TFP growth into efficiency change and technical change components using Malmquist productivity index and distinguishing between upstream R&D spillovers and downstream R&D spillovers. We find TFP grow slightly during 2000–2007, and R&D investment indeed serves as an engine of productivity growth just as endogenous growth theories argued, which is largely because R&D accelerates technical progress even it also results in enlarging technical inefficiency. However, we find a robust negative effect of downstream R&D spillovers on TFP growth, the effects of upstream is positive but not statistically significant. In addition, we do not find the positive effects of human capital on TFP as endogenous growth theories indicated, but find human capital severs as “assimilation device” for R&D spillovers both in promoting TFP growth and increasing technical efficiency even the effects on technical progress is adverse.     

Firms’ productivity growth and R&D spillovers: An analysis of alternative technological proximity measures

This paper aim at assessing the impact of R&D spillovers on firms’ economic performance as measured by productivity growth. The construction of R&D spillovers is based on Jaffe's methodology (1988, 1996) which associates econometrics and data analysis. The main objective of the paper is to extend Jaffe's methodology by examining alternative methods for measuring R&D spillovers and to test their impacts in terms of the robustness of results. In particular, the method used to classify firms into technological clusters as well as the metrics implemented to appreciate firms’ technological proximities which enter the construction of spillovers are further investigated. In addition to R&D spillovers, firms’ own R&D capital, labour and physical capital are estimated by means of a Cobb–Douglas production function. The data set consists of a representative sample of 625 worldwide R&D intensive firms over the period 1987–1994.     

Trade-related spillovers and industrial competitiveness: Exploring the linkages for OECD countries

This study examines how trade-related spillovers impact the OECD countries' industrial competitiveness; with an emphasis on China's innovative efforts and reintegration into the global economy. In comparison with the major R&D countries, benefits attributable to spillovers are found to be more sizable for the rest of the OECD countries.This result is consistent with the observed convergence of competitiveness between the two groups of countries during 1990–2009.Moreover, our empirical results suggest China's trade-related spillovers can produce both positive and negative effects on OECD countries' industrial competitiveness. The persistence of the spillover effects is found even after controlling for trade openness creating possible spurious association. Finally, our finding TFP growth as the competitiveness driver stresses the consequential role of STI (science, technology, and innovation) policies in supporting sustainable and balanced growth.     

Absorptive capacity, efficiency effect and competitors�� spillovers

Standard innovation surveys do not consider incoming spillovers for non-innovative firms. As a consequence, empirical works may overestimate the absorptive capacity effect, particularly among competitors. The Swiss innovation surveys presented here measure the importance of knowledge for both innovating and non-innovating firms. This original feature enables us to show that knowledge from rivals actually deters manufacturing firms from engaging in R&D activities. We therefore provide stronger evidence that the efficiency effect due to intra-industry spillovers is larger than that generally estimated by data from standard surveys. The R&D based absorptive capacity is weaker than expected, and non-innovative firms as well as non-R&D firms heavily rely on their rivals’ knowledge to maintain their technological capacities.     

An empirical note on international R&D spillovers

Whether international R&D spillovers are global and trade-related is still a debated issue. By adopting two specifications that nest models previously estimated in the literature, we test the hypothesis that international R&D spillovers are global and trade-unrelated for a sample of OECD countries over the period 1971–2004. In particular, via a randomization exercise, we reject the null hypothesis of a “global pool of technology” and show that there are partitions of countries associated with relatively strong/weak knowledge spillovers. Then, we estimate a nonlinear specification that includes simultaneously geographical distance and international trade among the determinants of domestic TFP. We find robust evidence that both factors affect how foreign knowledge impacts on the domestic productivity of each recipient country.     

Driving forces for research and development strategies: an empirical analysis based on firm-level panel data

This paper investigates empirically different ways to organize research and development (R&D) within Swiss firms. Based on a longitudinal data set comprising three cross-sections (1999, 2002, and 2005) of the Swiss Innovation Survey, four different types of R&D strategies could have been separated; firms combine in-house R&D with R&D co-operations (coop) or in-house R&D with external R&D (buy), or they conduct in-house R&D, external R&D, and R&D co-operations (mixed), or they exclusively rely on in-house R&D (make). It is the aim of this paper to understand what drive firms to go for different strategies. Based on econometric estimations controlling for correlations between the dependent variables and endogeneity among the independent variables, it was found that concepts related to the absorptive capacity, incoming spillovers, and appropriability, the importance of different knowledge sources, the competitive environment, costs, and skill aspects as well as technological uncertainty are essential factors to determine a firm's decision to choose a specific way to organize R&D.     

Strategic Rivalry With Spillovers Within Segmented Versus Integrated Markets

We consider a two-stage game with firms investing in R&D in the first stage while competing [a] la Cournot in the second stage. The firms are located in two countries, which are either segmented or integrated. R&D spillovers occur between firms located in the same country as well as between firms located in different countries.

We first examine the consequences of market integration on the impact of national and international R&D spillovers on innovative efforts, effective R&D, profits and total welfare. Comparing the resulting equilibrium levels, we subsequently conclude that market integration always leads to higher R&D investments and output if international R&D spillovers are limited, while the welfare consequences are ambiguous. Finally, we also analyze the welfare maximization problem of a ‘constrained social planner who can only decide on the level of R&D spillovers.     

A dynamic model of R&D competition

This study considers a dynamic model of R&D competition in a situation of no uncertainty with identical firms in a perfect foresight. We are going to find out about the effects of firms' absorptive capacity on R&D strategies in the presence of technological spillovers. The conditions for the existence and uniqueness of a feedback–Nash equilibrium on firms' R&D expense will be also discussed. Numerical simulations will show as the introduction of the absorptive capacity reduces the impact of spillovers degree on firms' R&D strategies.     

Do R&D activities matter for productivity? A regional spatial approach assessing the role of human and social capital

We estimate the long-run effects of Research and Development (R&D) activities on Total Factor Productivity (TFP) across the Spanish regions during 1980–2007. We use panel data cointegration methods and control for spatial externalities linked to human and social capital. Our empirical results, robust to different specifications and additional control variables, show a significant direct effect of public R&D capital on productivity. No significant results are observed for private R&D capital. In contrast, the effect of patents is highly significant but proves to be small. Furthermore, Spain has greatly benefited from importing technology from leading countries. Spatial spillovers are crucial in explaining long-run productivity for the case of Spain. Human and social capital exert direct positive impacts, however, their effects are geographically bounded and negative spatial spillovers offset direct outcomes. Overall TFP increases when neighbouring territories engage in R&D activities.     

Impact of R&D expenditures,rainfall and temperature variations in agricultural productivity: empirical evidence from Bangladesh

ABSTRACT

This study aims to investigate dynamic relationships between research and development (R&D) expenditure, climate change (measured by annual rainfall and temperature variations), human capital (proxied by literacy) and total factor productivity (TFP) growth in Bangladesh agriculture. Pesaran’s Pooled Mean Group (PMG) estimator is used to a unique panel data of 17 regions of Bangladesh covering a 61-year period (1948–2008). In addition, the panel vector autoregression (PVAR) model is also applied to trace the responsiveness of TFP from a shock to R&D, extension services, and literacy rate. Results reveal that R&D has an insignificant impact on TFP in the short-run, while it has a significant positive impact in the long-run. The contributions of climate variables (i.e., rainfall and temperature variations) are highly significant and negative in the long run. The literacy rate is found to have a significant positive impact on TFP as expected. These results suggest that agricultural R&D investment and human capital could play an important role to ameliorate the adverse effects of climate change in the agricultural sector of Bangladesh.     

Infra-industry spillovers and R&D cooperation: Theory and evidence

We analyse both the theoretical and the empirical side of the issue of R&D spillovers. Each firm's R&D costs are increasing in the amount of information transmitted to other firms, and we account for the possibility that firms control spillovers. We consider both Cournot-Nash and Cournot-Stackelberg behavior. The empirical analysis suggests that (i) firms' control on spillovers is relatively low; (ii) the cost-saving effect associated to joint ventures or R&D cartels is confirmed for industries where firms rely mainly upon own R&D as a source of innovation; (iii) R&D cooperation may increase information sharing, thereby enhancing spillovers.     

THE INTERNATIONALIZATION OF AGRICULTURAL TECHNOLOGY: PATENTS, R&D SPILLOVERS, AND THEIR EFFECTS ON PRODUCTIVITY IN THE EUROPEAN UNION AND UNITED STATES

Multilateral indices of total factor productivity (TFP) allow efficiency comparisons between ten European Union countries and the United States from 1973 to 1993. Differences in TFP levels are then explained by land quality differences, public research and development (R&D) expenditures, education levels, private-sector patents, international spillovers of public R&D, and private-sector technology transfer. There is evidence that public R&D results in limited knowledge spillovers between the European countries and the United States. However, the use of international patent data from the Yale Technology Concordance shows not only that patents matter, but also that private sector technology transfer may be the dominant force in explaining TFP trends. The United States and the European Union countries with more advanced research systems (Netherlands, Denmark, France, and Belgium) converge in a high-growth club, while Germany, Luxembourg, Greece, Italy, Ireland, and the United Kingdom form the slow-growth group. Ignoring knowledge spillovers and technology transfer leads to biased estimates of R&D elasticities, which is hardly surprising since the private sector is now spending more than the public in some of these countries. Thus, the estimated rate of return to public agricultural R&D falls from over 60% in the closed economy model to 10% in the model that takes account of international spillovers. (JEL Q16)