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R&D and Productivity Growth in Finnish ICT Manufacturing

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  • Elina Berghäll

Abstract

A stochastic frontier model is applied to firm level panel data from the Finnish ICT manufacturing sector to explore the role of R&D and technological progress in the outstanding productivity growth Finland demonstrated in the latter half of the 1990?s. The sample is representative of over 90 % of the R&D carried out in the sector, which in turn represents about half of corporate R&D in Finland. Constant returns to scale production functions are clearly inappropriate and labour productivity provides a biased view of TFP. Results show increasing returns to scale and output growth to have been, until recent years, more important than technical change in TFP growth. Like all inputs, physical and R&D capital appear to be substitutes to some extent, reducing concern over low overall investment. The technology policy mix appears to have been R&D investment and R&D employment enhancing, at the expense of non-R&D labour and physical capital. Meanwhile, technical change has been R&D saving and labour using, with large and surprisingly persistent firm-specific differences in R&D productivity.

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Bibliographic Info

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 388.

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Date of creation: 04 May 2006
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Handle: RePEc:fer:dpaper:388

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Keywords: Finnish ICT industry; total factor productivity; technical change; R&D elasticity; technology policy;

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  1. Zvi Griliches & Jacques Mairesse, 1991. "Comparing Productivity Growth: An Exploration of French and U.S. Industrial and Firm Data," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 45-82 National Bureau of Economic Research, Inc.
  2. Bernstein, Jeffrey I. & Mamuneas, Theofanis P., 2006. "R&D depreciation, stocks, user costs and productivity growth for US R&D intensive industries," Structural Change and Economic Dynamics, Elsevier, vol. 17(1), pages 70-98, January.
  3. Zvi Griliches & Jacques Mairesse, 1984. "Productivity and R&D at the Firm Level," NBER Chapters, in: R & D, Patents, and Productivity, pages 339-374 National Bureau of Economic Research, Inc.
  4. Hall, Bronwyn H., 2002. "The Financing of Research and Development," Department of Economics, Working Paper Series qt34c1c643, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. Cristiano Antonelli, 2006. "Diffusion as a Process of Creative Adoption," The Journal of Technology Transfer, Springer, vol. 31(2), pages 211-226, 03.
  6. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  7. Jaakko Kiander & Reino Hjerppe & Elina Berghäll & Tuomo Heikkilä & Juha Kilponen & Vladimir Lavrac & Peter Stanovnik, 2002. "The Role of Science and Technology Policy in Small Economies," Research Reports 91, Government Institute for Economic Research Finland (VATT).
  8. Francesco Daveri & Olmo Silva, 2004. "Not only Nokia: what Finland tells us about "new economy" growth," Economic Policy, CEPR & CES & MSH, vol. 19(38), pages 117-163, 04.
  9. Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series 2000-19, Board of Governors of the Federal Reserve System (U.S.).
  10. Paul Stoneman & Otto Toivanen, 2001. "The Impact of Revised Recommended Accounting Practices on R&D Reporting by UK Firms," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(1), pages 123-136.
  11. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring.
  12. Piekkola, Hannu, . "Knowledge and Innovation Subsidies as Engines for Growth. The Competitiveness of Finnish Regions," ETLA B, The Research Institute of the Finnish Economy, number 216, Spring.
  13. Zvi Griliches, 1998. "Returns to Research and Development Expenditures in the Private Sector," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 49-81 National Bureau of Economic Research, Inc.
  14. Maliranta, Mika, 2001. "Productivity Growth and Micro-level Restructuring. Finnish experiences during the turbulent decades," Discussion Papers 757, The Research Institute of the Finnish Economy.
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