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The R&D-growth paradox arises in fast-growing sectors

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  • Ejermo, Olof
  • Kander, Astrid
  • Svensson Henning, Martin

Abstract

Several notions of a R&D paradox can be found in the literature. In the Swedish Paradox version, the emphasis is normally on high and growing levels of business R&D connected to comparatively low GDP growth rates. This paper examines whether this pattern is consistent over time and, more importantly, which sectors drive the aggregate patterns. Based on an investigation of the entire Swedish economy 1985-2001, there is clear evidence that the paradox occurs only in fast-growing manufacturing and service sectors. Fast-growing sectors show an increasing gap between R&D and value-added growth, while the slow-growing sectors do not. This paradox is not interpreted as a sign of failure of the national innovation system, as the largest gap would then be for the slow-growing sectors, failing to transform R&D to economic growth. The gap between R&D and GDP is consistent with the idea of diminishing marginal returns to R&D investment in high-investing sectors. The evidence does not rule out, however, that rendering the innovation system more effective could yield better outcomes. As the findings of a gap are quite consistent over time, it seems fair to conclude that businesses have good reasons for their high R&D investments, despite not being on par with their production growth.

Suggested Citation

  • Ejermo, Olof & Kander, Astrid & Svensson Henning, Martin, 2011. "The R&D-growth paradox arises in fast-growing sectors," Research Policy, Elsevier, vol. 40(5), pages 664-672, June.
  • Handle: RePEc:eee:respol:v:40:y:2011:i:5:p:664-672
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    Cited by:

    1. Asheim, Bjørn & Moodysson, Jerker, 2017. "Innovation policy for economic resilience: The case of Sweden," Papers in Innovation Studies 2017/5, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    2. Sven-Olov Daunfeldt & Niklas Elert & Dan Johansson, 2016. "Are high-growth firms overrepresented in high-tech industries?," Industrial and Corporate Change, Oxford University Press, vol. 25(1), pages 1-21.
    3. Shahid Yusuf, 2012. "From Technological Catch-up to Innovation : The Future of China’s GDP Growth," World Bank Other Operational Studies 12781, The World Bank.
    4. Edquist , Charles & Zabala-Iturriagagoitia , Jon Mikel, 2015. "The Innovation Union Scoreboard is flawed: The Case of Sweden – not the innovation leader of the EU – updated version," Papers in Innovation Studies 2015/27, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    5. Tai-Yoo Kim & Mi-Ae Jung & Eungdo Kim & Eunnyeong Heo, 2011. "The Faster-Accelerating Growth of the Knowledge-Based Society," TEMEP Discussion Papers 201181, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Nov 2011.
    6. Jacobsson, Staffan & Lindholm-Dahlstrand, Åsa & Elg, Lennart, 2013. "Is the commercialization of European academic R&D weak?—A critical assessment of a dominant belief and associated policy responses," Research Policy, Elsevier, vol. 42(4), pages 874-885.
    7. Edquist , Charles & Zabala-Iturriagagoitia , Jon Mikel, 2015. "The Innovation Union Scoreboard is Flawed: The case of Sweden – not being the innovation leader of the EU," Papers in Innovation Studies 2015/16, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    8. Bergman, Karin & Ejermo, Olof, 2011. "Swedish Business R&D and its Export Dependence," Working Papers 2011:26, Lund University, Department of Economics.
    9. Franco, Chiara, 2013. "Exports and FDI motivations: Empirical evidence from U.S. foreign subsidiaries," International Business Review, Elsevier, vol. 22(1), pages 47-62.
    10. Moutinho, Ricardo & Au-Yong-Oliveira, Manuel & Coelho, Arnaldo & Manso, José Pires, 2015. "Beyond the “Innovation's Black-Box”: Translating R&D outlays into employment and economic growth," Socio-Economic Planning Sciences, Elsevier, vol. 50(C), pages 45-58.
    11. Grilli, Luca & Murtinu, Samuele, 2014. "Government, venture capital and the growth of European high-tech entrepreneurial firms," Research Policy, Elsevier, vol. 43(9), pages 1523-1543.
    12. Antonio Revilla & Zulima Fernández, 2013. "Environmental Dynamism, Firm Size and the Economic Productivity of R&D," Industry and Innovation, Taylor & Francis Journals, vol. 20(6), pages 503-522, August.
    13. Mariana Mazzucato & Stuart Parris, 2015. "High-growth firms in changing competitive environments: the US pharmaceutical industry (1963 to 2002)," Small Business Economics, Springer, vol. 44(1), pages 145-170, January.
    14. Maza, Adolfo & Villaverde, José & Hierro, María, 2014. "Should cohesion policy focus on fostering R&D? Evidence from Spain," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 29, pages 139-164.
    15. repec:taf:oabmxx:v:4:y:2017:i:1:p:1296802 is not listed on IDEAS

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