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Corporate R&D and Productivity in Germany and the United Kingdom

  • Stephen Bond
  • Dietmar Harhoff
  • John Van Reenen

This paper analyzes differences in R&D spending and in the impact of R&D on productivity between German and UK firms. We confirm that German firms spend significantly larger amounts on R&D than their UK counterparts, even after controlling for firm size and industry effects. Using a dynamic production function approach, we find that the R&D output elasticity is approximately the same in both countries, implying a much larger rate of return on R&D in the UK than in Germany. We discuss several explanations for this result.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0599.

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Date of creation: Dec 2003
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Handle: RePEc:cep:cepdps:dp0599
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  2. Philippe Cuneo & Jacques Mairesse, 1984. "Productivity and R&D at the Firm Level in French Manufacturing," NBER Chapters, in: R&D, Patents, and Productivity, pages 375-392 National Bureau of Economic Research, Inc.
  3. Hall, Bronwyn H. & Mairesse, Jacques, 1995. "Exploring the relationship between R&D and productivity in French manufacturing firms," Journal of Econometrics, Elsevier, vol. 65(1), pages 263-293, January.
  4. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  5. Zvi Griliches, 1998. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 17-45 National Bureau of Economic Research, Inc.
  6. Griliches, Zvi, 1986. "Productivity, R&D, and the Basic Research at the Firm Level in the 1970's," American Economic Review, American Economic Association, vol. 76(1), pages 141-54, March.
  7. Stephen Bond & Julie Elston & Jacques Mairesse & Benoit Mulkay, 1997. "Financial Factors and Investment in Belgium, France, Germany and the UK:A Comparison Using Company Panel Data," NBER Working Papers 5900, National Bureau of Economic Research, Inc.
  8. Zvi Griliches, 1985. "Productivity, R&d, and Basic Research at the Firm Level in the 1970s," NBER Working Papers 1547, National Bureau of Economic Research, Inc.
  9. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  10. Van Reenen, John, 1997. "Why has Britain had slower R&D growth?," Research Policy, Elsevier, vol. 26(4-5), pages 493-507, December.
  11. Stephen Bond & Dietmar Harhoff & John Van Reenen, 2010. "Investment, R&D and Financial Constraints in Britain and Germany," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 433-460 National Bureau of Economic Research, Inc.
  12. Fier, Andreas & Harhoff, Dietmar, 2001. "Die Evolution der bundesdeutschen Forschungs- und Technologiepolitik: Rückblick und Bestandsaufnahme," ZEW Discussion Papers 01-61, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
  14. Bean, Charles R, 1981. "An Econometric Model of Manufacturing Investment in the UK," Economic Journal, Royal Economic Society, vol. 91(361), pages 106-21, March.
  15. R. Glenn Hubbard, 1997. "Capital-Market Imperfections and Investment," NBER Working Papers 5996, National Bureau of Economic Research, Inc.
  16. Goto, Akira & Suzuki, Kazuyuki, 1989. "R&D Capital, Rate of Return on R&D Investment and Spillover of R&D in Japanese Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 555-64, November.
  17. Zvi Griliches & Jacques Mairesse, 1981. "Productivity and R and D at the Firm Level," NBER Working Papers 0826, National Bureau of Economic Research, Inc.
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