R&D and Absorptive Capacity: Theory and Empirical Evidence
This paper presents a single unified framework that integrates the theoretical literature on Schumpeterian endogenous growth and major strands of the empirical literature on R&D, productivity growth and productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992,1998) , we provide microeconomic foundations for the reduced-form equations for total factor productivity (TFP); growth frequently estimated empirically using industry-level data. R&D affects both innovation and the assimilation of others' discoveries ("absorptive capacity"). Long-run cross-country differences in productivity emerge endogenously, and the analysis implies that many existing studies underestimate R&D's social rate of return by neglecting absorptive capacity. Copyright The editors of the "Scandinavian Journal of Economics", 2002 .
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Volume (Year): 105 (2003)
Issue (Month): 1 (03)
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