IDEAS home Printed from https://ideas.repec.org/p/hhs/iuiwop/1108.html
   My bibliography  Save this paper

Do R&D and ICT Affect Total Factor Productivity Growth Differently?

Author

Listed:
  • Edquist, Harald

    (Ericsson Research)

  • Henrekson, Magnus

    (Research Institute of Industrial Economics (IFN))

Abstract

We analyze the effect of ICT and R&D on total factor productivity (TFP) growth across different industries in Sweden. R&D alone is significantly associated with contemporaneous TFP growth, thus exhibiting indirect effects. Although there is no significant short-run association between ICT and TFP, we find a positive association with a lag of seven to eight years. Thus, R&D affect TFP much faster than ICT-investments. We also divide ICT capital into hardware and software capital. To our knowledge, this distinction has not been made in any previous study analyzing TFP at the industry level. The results show that lagged hardware capital services growth is significantly associated with TFP growth. Hence, investments complementary to hardware are needed to reap the long-run TFP effects from reorganizing production.

Suggested Citation

  • Edquist, Harald & Henrekson, Magnus, 2016. "Do R&D and ICT Affect Total Factor Productivity Growth Differently?," Working Paper Series 1108, Research Institute of Industrial Economics, revised 28 Nov 2016.
  • Handle: RePEc:hhs:iuiwop:1108
    as

    Download full text from publisher

    File URL: https://www.ifn.se/wfiles/wp/wp1108.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Markus Eberhardt & Christian Helmers & Hubert Strauss, 2013. "Do Spillovers Matter When Estimating Private Returns to R&D?," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 436-448, May.
    2. Oh, Donghyun & Heshmati, Almas & Lööf, Hans, 2014. "Total factor productivity of Korean manufacturing industries: Comparison of competing models with firm-level data," Japan and the World Economy, Elsevier, vol. 30(C), pages 25-36.
    3. Oecd, 2003. "Seizing the Benefits of ICT in a Digital Economy," OECD Digital Economy Papers 72, OECD Publishing.
    4. Susanto Basu & John G. Fernald & Nicholas Oulton & Sylaja Srinivasan, 2004. "The Case of the Missing Productivity Growth, or Does Information Technology Explain Why Productivity Accelerated in the United States but Not in the United Kingdom?," NBER Chapters, in: NBER Macroeconomics Annual 2003, Volume 18, pages 9-82, National Bureau of Economic Research, Inc.
    5. Carol Corrado & Charles Hulten & Daniel Sichel, 2009. "Intangible Capital And U.S. Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 661-685, September.
    6. Bronwyn H. Hall, 2010. "Measuring the Returns to R&D: The Depreciation Problem," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 341-381, National Bureau of Economic Research, Inc.
    7. William Robert Reed, 2015. "On the Practice of Lagging Variables to Avoid Simultaneity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(6), pages 897-905, December.
    8. Basu, Susanto & Fernald, John G., 1995. "Are apparent productive spillovers a figment of specification error?," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 165-188, August.
    9. Harald Edquist, 2011. "CAN INVESTMENT IN INTANGIBLES EXPLAIN THE SWEDISH PRODUCTIVITY BOOM IN THE 1990s?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(4), pages 658-682, December.
    10. Peter Goodridge & Jonathan Haskel & Gavin Wallis, 2017. "Spillovers from R&D and Other Intangible Investment: Evidence from UK Industries," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63, pages 22-48, February.
    11. repec:adr:anecst:y:2005:i:79-80 is not listed on IDEAS
    12. Haskel, Jonathan & Wallis, Gavin, 2013. "Public support for innovation, intangible investment and productivity growth in the UK market sector," Economics Letters, Elsevier, vol. 119(2), pages 195-198.
    13. 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.
    14. Carol Corrado & Jonathan Haskel & Cecilia Jona-Lasinio, 2017. "Knowledge Spillovers, ICT and Productivity Growth," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(4), pages 592-618, August.
    15. Audretsch, David B. & Baumol, William J. & Burke, Andrew E., 2001. "Competition policy in dynamic markets," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 613-634, April.
    16. Kevin J. Stiroh, 2002. "Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?," American Economic Review, American Economic Association, vol. 92(5), pages 1559-1576, December.
    17. Mary O'Mahony & Michela Vecchi, 2005. "Quantifying the Impact of ICT Capital on Output Growth: A Heterogeneous Dynamic Panel Approach," Economica, London School of Economics and Political Science, vol. 72(288), pages 615-633, November.
    18. Edquist, Harald & Henrekson, Magnus, 2017. "Swedish lessons: How important are ICT and R&D to economic growth?," Structural Change and Economic Dynamics, Elsevier, vol. 42(C), pages 1-12.
    19. Hall, Bronwyn H. & Mairesse, Jacques & Mohnen, Pierre, 2010. "Measuring the Returns to R&D," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1033-1082, Elsevier.
    20. Paola Caselli & Francesco Patern�, 2001. "ICT accumulation and productivity growth in the United States: an analysis based on industry data," Temi di discussione (Economic working papers) 419, Bank of Italy, Economic Research and International Relations Area.
    21. Erik Brynjolfsson & Lorin M. Hitt, 2003. "Computing Productivity: Firm-Level Evidence," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 793-808, November.
    22. Zvi Griliches, 1998. "The Search for R&D Spillovers," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 251-268, National Bureau of Economic Research, Inc.
    23. Edquist, Harald & Henrekson, Magnus, 2004. "Technological Breakthroughs and Productivity Growth," SSE/EFI Working Paper Series in Economics and Finance 0562, Stockholm School of Economics, revised 23 Jan 2006.
    24. Dale W. Jorgenson & Mun S. Ho & Kevin J. Stiroh, 2008. "A Retrospective Look at the U.S. Productivity Growth Resurgence," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 3-24, Winter.
    25. Harald Badinger & Peter Egger, 2016. "Productivity Spillovers Across Countries and Industries: New Evidence From OECD Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(4), pages 501-521, August.
    26. Susanto Basu & John G. Fernald & Nicholas Oulton & Sylaja Srinivasan, 2003. "The Case of the Missing Productivity Growth: Or, Does Information Technology Explain why Productivity Accelerated in the US but not the UK?," NBER Working Papers 10010, National Bureau of Economic Research, Inc.
    27. D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
    28. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    29. Kevin J. Stiroh, 2005. "Reassessing the Impact of IT in the Production Function: A Meta-Analysis and Sensitivity Tests," Annals of Economics and Statistics, GENES, issue 79-80, pages 529-561.
    30. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-361, May.
    31. Chen, Wen & Niebel, Thomas & Saam, Marianne, 2016. "Are intangibles more productive in ICT-intensive industries? Evidence from EU countries," Telecommunications Policy, Elsevier, vol. 40(5), pages 471-484.
    32. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
    33. Stephen D. Oliner & Daniel E. Sichel, 2000. "The resurgence of growth in the late 1990s: is information technology the story?," Proceedings, Federal Reserve Bank of San Francisco.
    34. Brent R. Moulton, 2001. "The Expanding Role of Hedonic Methods in the Official Statistics of the United States," BEA Papers 0018, Bureau of Economic Analysis.
    35. Goodridge, PR & Haskel, J & Wallis, G, 2014. "The "C" in ICT: communications capital, spillovers and UK growth," Working Papers 18382, Imperial College, London, Imperial College Business School.
    36. Bresnahan, Timothy F. & Trajtenberg, M., 1995. "General purpose technologies 'Engines of growth'?," Journal of Econometrics, Elsevier, vol. 65(1), pages 83-108, January.
    37. Rachel Griffith & Stephen Redding & John Van Reenen, 2004. "Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 883-895, November.
    38. Zvi Griliches, 1998. "Productivity, R&D, and the Data Constraint," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 347-374, National Bureau of Economic Research, Inc.
    39. repec:adr:anecst:y:2005:i:79-80:p:20 is not listed on IDEAS
    40. Francesco Venturini & Ana Rincon-Aznar & Dr Michela Vecchi, 2013. "ICT as a general purpose technology: spillovers, absorptive capacity and productivity performance," National Institute of Economic and Social Research (NIESR) Discussion Papers 416, National Institute of Economic and Social Research.
    41. Francesco Venturini & Ana Rincon-Aznar & Dr Michela Vecchi, 2013. "ICT as a general purpose technology: spillovers, absorptive capacity and productivity performance," National Institute of Economic and Social Research (NIESR) Discussion Papers 416, National Institute of Economic and Social Research.
    42. Edquist, Harald, 2013. "Can double deflation explain the ICT growth miracle?," Economics Letters, Elsevier, vol. 121(2), pages 302-305.
    43. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    44. Susanto Basu & John G. Fernald, 2008. "Information and communications technology as a general purpose technology: evidence from U.S. industry data," Economic Review, Federal Reserve Bank of San Francisco, pages 1-15.
    45. Bart van Ark, 2014. "Total factor productivity : Lessons from the past and directions for the future," Working Paper Research 271, National Bank of Belgium.
    46. Kevin J. Stiroh, 2002. "Are ICT Spillovers Driving the New Economy?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(1), pages 33-57, March.
    47. Robert Inklaar & Mary O'Mahony & Marcel Timmer, 2005. "ICT AND EUROPE's PRODUCTIVITY PERFORMANCE: INDUSTRY‐LEVEL GROWTH ACCOUNT COMPARISONS WITH THE UNITED STATES," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(4), pages 505-536, December.
    48. Henry van der Wiel & George van Leeuwen, 2003. "Do ICT spillovers matter; evidence from Dutch firm-level data," CPB Discussion Paper 26, CPB Netherlands Bureau for Economic Policy Analysis.
    49. Venturini, Francesco, 2015. "The modern drivers of productivity," Research Policy, Elsevier, vol. 44(2), pages 357-369.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nair, Mahendhiran & Pradhan, Rudra P. & Arvin, Mak B., 2020. "Endogenous dynamics between R&D, ICT and economic growth: Empirical evidence from the OECD countries," Technology in Society, Elsevier, vol. 62(C).
    2. Jiao, Jianling & Jiang, Guili & Yang, Ranran, 2018. "Impact of R&D technology spillovers on carbon emissions between China’s regions," Structural Change and Economic Dynamics, Elsevier, vol. 47(C), pages 35-45.
    3. Shahnazi, Rouhollah, 2021. "Do information and communications technology spillovers affect labor productivity?," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 342-359.
    4. Hidemichi Fujii & Akihiko Shinozaki & Shigemi Kagawa & Shunsuke Managi, 2019. "How Does Information and Communication Technology Capital Affect Productivity in the Energy Sector? New Evidence from 14 Countries, Considering the Transition to Renewable Energy Systems," Energies, MDPI, vol. 12(9), pages 1-16, May.
    5. Zhang, Jiaping & Cheng, Mingwang & Yu, Ning, 2020. "Internet Use and Lower Life Satisfaction: The Mediating Effect of Environmental Quality Perception," Ecological Economics, Elsevier, vol. 176(C).
    6. Andersson, Martin & Kusetogullari, Anna & Wernberg, Joakim, 2021. "Software development and innovation: Exploring the software shift in innovation in Swedish firms," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    7. Huang, Junbing & Cai, Xiaochen & Huang, Shuo & Tian, Sen & Lei, Hongyan, 2019. "Technological factors and total factor productivity in China: Evidence based on a panel threshold model," China Economic Review, Elsevier, vol. 54(C), pages 271-285.
    8. Kim, Keungoui & Bounfour, Ahmed & Nonnis, Alberto & Özaygen, Altay, 2021. "Measuring ICT externalities and their contribution to productivity: A bilateral trade based approach," Telecommunications Policy, Elsevier, vol. 45(2).
    9. Maciej Ryczkowski, 2021. "Money and inflation in inflation-targeting regimes – new evidence from time–frequency analysis," Journal of Applied Economics, Taylor & Francis Journals, vol. 24(1), pages 17-44, January.
    10. Congbo Chen & Azhong Ye, 2021. "Heterogeneous Effects of ICT across Multiple Economic Development in Chinese Cities: A Spatial Quantile Regression Model," Sustainability, MDPI, vol. 13(2), pages 1-13, January.
    11. Edquist, Harald, 2022. "The economic impact of mobile broadband speed," Telecommunications Policy, Elsevier, vol. 46(5).
    12. Riccardo Pariboni & Pasquale Tridico, 2020. "Structural change, institutions and the dynamics of labor productivity in Europe," Journal of Evolutionary Economics, Springer, vol. 30(5), pages 1275-1300, November.
    13. Khanna, Rupika & Sharma, Chandan, 2021. "Do technological investments promote manufacturing productivity? A firm-level analysis for India," Economic Modelling, Elsevier, vol. 105(C).
    14. Xinhai Lu & Danling Chen & Yue Wang, 2019. "Is Urban Sprawl Decoupled from the Quality of Economic Growth? Evidence from Chinese Cities," Sustainability, MDPI, vol. 12(1), pages 1-17, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edquist, Harald & Henrekson, Magnus, 2017. "Swedish lessons: How important are ICT and R&D to economic growth?," Structural Change and Economic Dynamics, Elsevier, vol. 42(C), pages 1-12.
    2. Pieri, Fabio & Vecchi, Michela & Venturini, Francesco, 2018. "Modelling the joint impact of R&D and ICT on productivity: A frontier analysis approach," Research Policy, Elsevier, vol. 47(9), pages 1842-1852.
    3. Schubert, Torben & Jäger, Angela & Türkeli, Serdar & Visentin, Fabiana, 2020. "Addressing the productivity paradox with big data: A literature review and adaptation of the CDM econometric model," MERIT Working Papers 2020-050, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    4. Oliner, Stephen D. & Sichel, Daniel E. & Stiroh, Kevin J., 2008. "Explaining a productive decade," Journal of Policy Modeling, Elsevier, vol. 30(4), pages 633-673.
    5. Venturini, Francesco, 2015. "The modern drivers of productivity," Research Policy, Elsevier, vol. 44(2), pages 357-369.
    6. Ana Rincon & Michela VECCHI & Francesco VENTURINI, 2012. "ICT spillovers, absorptive capacity and productivity performance," Quaderni del Dipartimento di Economia, Finanza e Statistica 103/2012, Università di Perugia, Dipartimento Economia.
    7. Nicholas Tsounis & Ian Steedman, 2021. "A New Method for Measuring Total Factor Productivity Growth Based on the Full Industry Equilibrium Approach: The Case of the Greek Economy," Economies, MDPI, vol. 9(3), pages 1-21, August.
    8. Edquist, Harald, 2022. "The economic impact of mobile broadband speed," Telecommunications Policy, Elsevier, vol. 46(5).
    9. Oulton, Nicholas, 2012. "Long term implications of the ICT revolution: Applying the lessons of growth theory and growth accounting," Economic Modelling, Elsevier, vol. 29(5), pages 1722-1736.
    10. Federico Biagi, 2013. "ICT and Productivity: A Review of the Literature," JRC Working Papers on Digital Economy 2013-09, Joint Research Centre (Seville site).
    11. Kallal, Rahim & Haddaji, Abir & Ftiti, Zied, 2021. "ICT diffusion and economic growth: Evidence from the sectorial analysis of a periphery country," Technological Forecasting and Social Change, Elsevier, vol. 162(C).
    12. Venturini, Francesco, 2022. "Intelligent technologies and productivity spillovers: Evidence from the Fourth Industrial Revolution," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 220-243.
    13. Robert Inklaar & Marcel P. Timmer & Bart Van Ark, 2007. "Mind the Gap! International Comparisons of Productivity in Services and Goods Production," German Economic Review, Verein für Socialpolitik, vol. 8(2), pages 281-307, May.
    14. Kim, Keungoui & Bounfour, Ahmed & Nonnis, Alberto & Özaygen, Altay, 2021. "Measuring ICT externalities and their contribution to productivity: A bilateral trade based approach," Telecommunications Policy, Elsevier, vol. 45(2).
    15. Francesco Venturini & Ana Rincon-Aznar & Dr Michela Vecchi, 2013. "ICT as a general purpose technology: spillovers, absorptive capacity and productivity performance," National Institute of Economic and Social Research (NIESR) Discussion Papers 416, National Institute of Economic and Social Research.
    16. Dimelis, Sophia P. & Papaioannou, Sotiris K., 2011. "ICT growth effects at the industry level: A comparison between the US and the EU," Information Economics and Policy, Elsevier, vol. 23(1), pages 37-50, March.
    17. Li, Qing & Wu, Yanrui, 2020. "Intangible capital, ICT and sector growth in China," Telecommunications Policy, Elsevier, vol. 44(1).
    18. Niebel, Thomas, 2018. "ICT and economic growth – Comparing developing, emerging and developed countries," World Development, Elsevier, vol. 104(C), pages 197-211.
    19. Danny Leung & Yi Zheng, 2012. "What affects MFP in the long-run? Evidence from Canadian industries," Applied Economics, Taylor & Francis Journals, vol. 44(6), pages 727-738, February.
    20. Wilson, Daniel J., 2009. "IT and Beyond: The Contribution of Heterogeneous Capital to Productivity," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 52-70.

    More about this item

    Keywords

    ICT; R&D; Hardware; Software; Total factor productivity; Panel data analysis;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:iuiwop:1108. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/iuiiise.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Elisabeth Gustafsson (email available below). General contact details of provider: https://edirc.repec.org/data/iuiiise.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.