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Outsourced R&D and GDP Growth

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  • Anne Marie Knott

Abstract

Endogenous growth theory holds that growth should increase with R&D. However coarse comparison between R&D and US GDP growth over the past forty years indicates that inflation scientific labor increased 2.5 times, while GDP growth was at best stagnant. The leading explanation for the disconnect between theory and the empirical record is that R&D has gotten harder. I develop and test an alternative view that firms have become worse at it. I find no evidence R&D has gotten harder. Instead I find firms’ R&D productivity declined 65%, and that the main culprit in the decline is outsourced R&D, which is unproductive for the funding firm. This offers hope firms’ R&D productivity and economic growth may be fairly easily restored by bringing outsourced R&D back in-house.

Suggested Citation

  • Anne Marie Knott, 2016. "Outsourced R&D and GDP Growth," Working Papers 16-19, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:16-19
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    File URL: https://www2.census.gov/ces/wp/2016/CES-WP-16-19.pdf
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    References listed on IDEAS

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    Cited by:

    1. Frank Nagle, 2018. "Learning by Contributing: Gaining Competitive Advantage Through Contribution to Crowdsourced Public Goods," Organization Science, INFORMS, vol. 29(4), pages 569-587, August.

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