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R&D and absorptive capacity: from theory to data


  • Rachel Griffith

    () (Institute for Fiscal Studies and IFS and Manchester)

  • Stephen Redding

    () (Institute for Fiscal Studies and University College London)

  • John Van Reenen

    (Institute for Fiscal Studies)


This paper presents a unified model that integrates the theoretical literatue on Schumpeterian endogenous growth, the microeconometric literature on R&D and productivity, and the empirical literature on productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992, 1998), we provide microeconomic foundations for a reduced-form equation for Total Factor Productivity (TFP) growth that is commonly used in the empirical literature. We allow a role for R&D in innovation and technology transfer (absorptive capacity). The analysis suggests that many existing studies underestimate R&D's social rate of return and provides an explanation for long-run productivity levels at the industry level.

Suggested Citation

  • Rachel Griffith & Stephen Redding & John Van Reenen, 2001. "R&D and absorptive capacity: from theory to data," IFS Working Papers W01/03, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:01/03

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    Cited by:

    1. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    2. Romain, Astrid & Pottelsberghe de la Potterie, Bruno van, 2003. "The Economic Impact of Venture Capital," IIR Working Paper 03-20, Institute of Innovation Research, Hitotsubashi University.
    3. Dominique Guellec & Bruno Van Pottelsberghe de la Potterie, 2004. "From R&D to Productivity Growth: Do the Institutional Settings and the Source of Funds of R&D Matter?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(3), pages 353-378, July.
    4. Lederman, Daniel & Maloney, William F., 2003. "Research and development (R&D) and development," Policy Research Working Paper Series 3024, The World Bank.

    More about this item


    Absorptive capacity; endogenous growth; R&D; Total Factor;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence


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