Innovation, international technological diffusion and the changing influence of R&D on productivity

This paper analyses the relationship between OECD countries'business sector total factor productivity and domestic and foreignR&D efforts during the period 1961-1991. A sensitivity analysisis performed by making use of alternate estimations of specificationsin growth terms and in level terms. The results are shown tobe robust. They show that the influence of international technologicaldiffusion is, on average, substantially stronger than that ofdomestic R&D. In the case of the large economies, however,the latter influence is found to be more important. A structuralstability analysis provides evidence of a decrease in the estimatesin the mid-1970s, without significant recovery afterwards. Variouslong-run supply effects appear to have contributed. The discontinuousnature of the reduction does indicate, however, that these werereinforced by macroeconomic disturbances at the demand side.