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Measuring the Returns of Research and Development: An Empirical Study of the German Manufacturing Sector over 45 Years

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  • Guenter Lang

    ()
    (Faculty of Management Technology, The German University in Cairo)

Abstract

Motivated by recent statistics that show significant growth in labor productivity, this paper seeks to analyze the 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 percent of the effects of R&D on the knowledge stock appear within four 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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File URL: http://mgt.guc.edu.eg/wpapers/010lang2008.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by The German University in Cairo, Faculty of Management Technology in its series Working Papers with number 10.

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Length: 24 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:guc:wpaper:10

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Web page: http://mgt.guc.edu.eg/economics/RePEc/guc/
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Keywords: Productivity; innovation; research; development; technology; productivity slowdown;

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  1. David B. audretsch & Erik E. Lehmann, 2005. "Mansfield's Missing Link: The Impact of Knowledge Spillovers on Firm Growth," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 207-210, 01.
  2. Beise, Marian & Stahl, Harald, 1998. "Public research and industrial innovations in Germany," ZEW Discussion Papers 98-37, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Hall, Bronwyn H. & Mairesse, Jacques, 1995. "Exploring the relationship between R&D and productivity in French manufacturing firms," Journal of Econometrics, Elsevier, vol. 65(1), pages 263-293, January.
  4. David Audretsch & Erik Lehmann, 2006. "Do locational spillovers pay? empirical evidence from German IPO data," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(1), pages 71-81.
  5. Flaig, Gebhard & Steiner, Viktor, 1993. "Searching for the "Productivity Slowdown": Some Surprising Findings from West German Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 57-65, February.
  6. Popp, David C., 2001. "The effect of new technology on energy consumption," Resource and Energy Economics, Elsevier, vol. 23(3), pages 215-239, July.
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