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R&D and Non-Linear Productivity Growth of Heterogeneous Firms

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The present paper studies the relationship between R&D investment and firm productivity growth by explicitly accounting for non-linearities in the R&D-productivity relationship and inter-sectoral firm heterogeneity. In order to address these issues, we employ a two step estimation approach, and match two firm-level panel data sets for the OECD countries, which allows us to relax both the linearity and homogeneity assumptions of the canonical Griliches (1979) knowledge capital model. Our results suggest that: (i) R&D investment increases firm productivity with an average elasticity of 0.15; (ii) the impact of R&D investment on firm productivity is differential at different levels of R&D intensity – the productivity elasticity ranges from -0.02 for low levels of R&D intensity to 0.33 for high levels of R&D intensity; (iii) the relationship between R&D expenditures and productivity growth is non-linear, and only after a certain critical mass of R&D is reached, the productivity growth is significantly positive; (iv) there are important intersectoral differences with respect to R&D investment and firm productivity – high-tech sectors’ firms not only invest more in R&D, but also achieve more in terms of productivity gains connected with research activities.

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  • d'Artis Kancs & Boriss Siliverstovs, 2012. "R&D and Non-Linear Productivity Growth of Heterogeneous Firms," JRC Working Papers JRC77247, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:iptwpa:jrc77247
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    Cited by:

    1. Olga Ivanova & d'Artis Kancs & Dirk Stelder, 2009. "Modelling Inter-Regional Trade Flows: Data and Methodological Issues in Rhomolo," EERI Research Paper Series EERI RP 2009/31, Economics and Econometrics Research Institute (EERI), Brussels.
    2. Jesus Lopez-Rodriguez & Diego Martinez, 2014. "Beyond the R&D effects on innovation: the contribution of non-R&D activities to TFP growth in the EU," Working Papers 2014/16, Institut d'Economia de Barcelona (IEB).
    3. Lopez-Rodriguez, Jesus & Martinez-Lopez, Diego, 2017. "Looking beyond the R&D effects on innovation: The contribution of non-R&D activities to total factor productivity growth in the EU," Structural Change and Economic Dynamics, Elsevier, vol. 40(C), pages 37-45.
    4. repec:eee:proeco:v:198:y:2018:i:c:p:38-49 is not listed on IDEAS
    5. Otello Ardovino & Luca Pennacchio, 2014. "Inter-firm R&D cooperation in local innovation networks: The case of Italian technological districts," EERI Research Paper Series EERI RP 2014/09, Economics and Econometrics Research Institute (EERI), Brussels.
    6. repec:eee:respol:v:47:y:2018:i:1:p:289-304 is not listed on IDEAS
    7. Sandro Montresor & Antonio Vezzani, 2015. "On the R&D giants’ shoulders: do FDI help to stand on them?," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(1), pages 33-60, March.
    8. Daniel Nepelski & Giuseppe Piroli, 2016. "Potential and partnerships in innovations in EU-funded research projects," EERI Research Paper Series EERI RP 2016/01, Economics and Econometrics Research Institute (EERI), Brussels.
    9. repec:spt:busent:v:6:y:2017:i:2:f:6_2_1 is not listed on IDEAS
    10. Otello Ardovino & Luca Pennacchio & Giuseppe Piroli, 2014. "Direct and indirect effects of R&D cooperation on the innovation of Italian firms," EERI Research Paper Series EERI RP 2014/03, Economics and Econometrics Research Institute (EERI), Brussels.
    11. Fonseca, Tiago & Lima, Francisco & Pereira, Sonia C., 2018. "Understanding productivity dynamics: A task taxonomy approach," Research Policy, Elsevier, vol. 47(1), pages 289-304.
    12. Minjung Kim, 2015. "Productivity spillovers from FDI and the role of domestic firm’s absorptive capacity in South Korean manufacturing industries," Empirical Economics, Springer, vol. 48(2), pages 807-827, March.
    13. Jean Mercenier & Maria Teresa Alvarez Martinez & Andries Brandsma & Francesco Di Comite & Olga Diukanova & d'Artis Kancs & Patrizio Lecca & Montserrat Lopez-Cobo & Philippe Monfort & Damiaan Persyn & , 2016. "RHOMOLO-v2 Model Description: A spatial computable general equilibrium model for EU regions and sectors," JRC Working Papers JRC100011, Joint Research Centre (Seville site).
    14. Diukanova, Olga & López-Rodríguez, Jesús, 2014. "Regional Impacts of non-R&D Innovation Expenditures across the EU Regions: Simulation Results Using the Rhomolo CGE Model," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 29, pages 91-111.

    More about this item

    Keywords

    R&D investment; firm productivity; generalised propensity score;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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