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Does history matter for the relationship between R&D, innovation, and productivity?

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  • Elena Huergo
  • Lourdes Moreno

Abstract

This article analyzes the relationship between R&D expenditures, innovation, and productivity growth, taking into account the possibility of persistence in firms' behavior. We study this relationship for a sample of Spanish manufacturing firms between 1990 and 2005, estimating a model with four equations: participation in technological activities, R&D intensity, the generation of innovations and the impact of these technological outputs on total factor productivity growth. Our results reflect the existence of true state dependence both in the decision of R&D investment and in the production of innovations. The omission of this persistence leads to an overestimation of the current impact of innovations on productivity growth. However, the presence of persistence in technological inputs and outputs entails current R&D activities having long-run effects on a firm's productivity. Copyright 2011 The Author 2011. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Suggested Citation

  • Elena Huergo & Lourdes Moreno, 2011. "Does history matter for the relationship between R&D, innovation, and productivity?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 20(5), pages 1335-1368, October.
    • Handle: RePEc:oup:indcch:v:20:y:2011:i:5:p:1335-1368
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    File URL: http://hdl.handle.net/10.1093/icc/dtr019
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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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