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The Productivity Effects of Internal and External R&D: Evidence From a Dynamic Panel Data Model

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  • Lokshin, Boris

    ()
    (UNU-MERIT)

  • Belderbos, René

    ()
    (Katholieke Universiteit Leuven, Eindhoven University of Technology)

  • Carree, Martin

    ()
    (University of Maastricht)

Abstract

We examine the impact of internal and external R&D on labor productivity in a 6-year panel of Dutch manufacturing firms. We apply a dynamic linear panel data model that allows for decreasing or increasing returns to scale in internal and external R&D and for economies of scope. We find complementarity between internal and external R&D, with a positive impact of external R&D only evident in case of sufficient internal R&D. These findings confirm the role of internal R&D in enhancing absorptive capacity and hence the effective utilization of external knowledge. The scope economies due the combination of internal and external R&D are accentuated by decreasing results to scale at high levels of internal and external R&D. The analysis indicates that on average productivity grows by increasing the share of external R&D in total R&D.

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Bibliographic Info

Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 026.

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Date of creation: 2007
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Handle: RePEc:unm:unumer:2007026

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Keywords: R&D; Innovation; Complementarity; Panel Data;

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