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Measuring the returns of R&D--An empirical study of the German manufacturing sector over 45 years

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  • Lang, Guenter

Abstract

Motivated by recent statistics that show significant growth in labor productivity, this paper seeks to analyze the long-term relationship between domestic R&D, knowledge stock and productivity dynamics. Time series data of the German manufacturing industry is used to estimate a variable cost function with the stock of knowledge being dependent upon current and past R&D spending. The estimates indicate that 50% of the effects of R&D on the knowledge stock appear within 4 years. However, the rate of return on R&D are shown to be drastically declining; recent rates of return on R&D are estimated to have reached an all-time low spanning the last 45 years. Current yields of R&D are only one third compared to the sixties. In conclusion, though the productivity slowdown of the seventies seems to have been overcome, this is not attributed to R&D investments.

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Bibliographic Info

Article provided by Elsevier in its journal Research Policy.

Volume (Year): 38 (2009)
Issue (Month): 9 (November)
Pages: 1438-1445

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Handle: RePEc:eee:respol:v:38:y:2009:i:9:p:1438-1445

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Web page: http://www.elsevier.com/locate/respol

Related research

Keywords: Productivity Innovation Research and development Diffusion Decay;

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Cited by:
  1. Driver, Ciaran & Guedes, Maria João Coelho, 2012. "Research and development, cash flow, agency and governance: UK large companies," Research Policy, Elsevier, vol. 41(9), pages 1565-1577.
  2. Andrea Bonaccorsi & Cinzia Daraio, 2013. "Knowledge spillover effects at the sub-regional level. Theory and estimation," DIAG Technical Reports 2013-13, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
  3. Jian Li & Kunrong Shen & Ru Zhang, 2011. "Measuring Knowledge Spillovers: A Non-appropriable Returns Perspective," Annals of Economics and Finance, Society for AEF, vol. 12(2), pages 265-293, November.
  4. Peilei Fan, 2011. "Innovation capacity and economic development: China and India," Economic Change and Restructuring, Springer, vol. 44(1), pages 49-73, April.
  5. Elias Carayannis & Vivienne Wang, 2012. "Competitiveness Model—A Double Diamond," Journal of the Knowledge Economy, Springer, vol. 3(3), pages 280-293, September.
  6. Ronia Hawash & Guenter Lang, 2010. "The Impact of Information Technology on Productivity in Developing Countries," Working Papers 19, The German University in Cairo, Faculty of Management Technology.

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