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What drives business Research and Development (R&D) intensity across Organisation for Economic Co-operation and Development (OECD) countries?

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  • Martin Falk

Abstract

This paper empirically investigates the potential determinants of business-sector R&D intensity using a panel of OECD (countries for the period of 1975-2002 with data measured as five-year averages). Estimates using a system GMM estimator controlling for endogeneity show a high degree of persistence in business-sector R&D expenditures. Tax incentives for R&D have a significant and positive impact on business R&D spending regardless of the specification and estimation techniques. Furthermore, we find that expenditures for R&D performed by universities are significantly positively related to business enterprise sector expenditures on R&D indicating that public sector R&D and private R&D are complements. Direct R&D subsidies and the high-tech export share are significantly positively related to business-sector R&D intensity, but these effects are only significant using the first-differenced GMM estimator. The static fixed effects results show that countries characterised by strong patent rights appear to have higher R&D intensities, but this effect is no longer significant in the dynamic panel data model.

Suggested Citation

  • Martin Falk, 2006. "What drives business Research and Development (R&D) intensity across Organisation for Economic Co-operation and Development (OECD) countries?," Applied Economics, Taylor & Francis Journals, vol. 38(5), pages 533-547.
  • Handle: RePEc:taf:applec:v:38:y:2006:i:5:p:533-547
    DOI: 10.1080/00036840500391187
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