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The Dynamics of R&D and Innovation in the Short-Run and in the Long-Run

Author

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  • Bottazzi, Laura
  • Peri, Giovanni

Abstract

In this Paper we estimate the dynamic relationship between resources used in R&D by some OECD countries and their innovation output as measured by patent applications. We first estimate a long-run cointegration relation using recently developed tests and panel estimation techniques. We find that the stock of knowledge of a country, it’s R&D resources and the stock of international knowledge move together in the long run. Then, imposing this long-run relation across variables we analyse the impulse response of new ideas to a shock to R&D or to a shock to innovation by estimating an error correction mechanism. We find that internationally generated ideas have a very significant impact in helping innovation in a country. As a consequence, a positive shock to innovation in a large country as the US has, both in the short and in the long run, a significant positive effect on the innovation of all other countries.

Suggested Citation

  • Bottazzi, Laura & Peri, Giovanni, 2004. "The Dynamics of R&D and Innovation in the Short-Run and in the Long-Run," CEPR Discussion Papers 4479, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4479
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    Citations

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    Cited by:

    1. Raffaello Bronzini & Paolo Piselli, 2006. "Determinants of long-run regional productivity: the role of R&D, human capital and public infrastructure," Temi di discussione (Economic working papers) 597, Bank of Italy, Economic Research and International Relations Area.
    2. Fabrizio Balassone & Maura Francese & Angelo Pace, 2011. "Public Debt and Economic Growth in Italy," Quaderni di storia economica (Economic History Working Papers) 11, Bank of Italy, Economic Research and International Relations Area.
    3. Bergheim, Stefan, 2007. "Pair-wise cointegration in long-run growth models," Research Notes 24, Deutsche Bank Research.

    More about this item

    Keywords

    error correction mechanism; innovation; international R&D spillovers; panel cointegration;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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