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

  • d'Artis Kancs
  • Boriss Siliverstovs

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 inter-sectoral 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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Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 32112.

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Date of creation: 2012
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Handle: RePEc:lic:licosd:32112
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  1. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  2. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  3. Czarnitzki, Dirk & Hanel, Petr & Rosa, Julio Miguel, 2004. "Evaluating the Impact of R&D Tax Credits on Innovation: A Microeconometric Study on Canadian Firms," ZEW Discussion Papers 04-77, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Zvi Griliches, 1998. "Comparing Productivity Growth: An Exploration of French and U.S. Industrial and Firm Data," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 157-186 National Bureau of Economic Research, Inc.
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  6. 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.
  7. Geroski, Paul A, 1998. "An Applied Econometrician's View of Large Company Performance," CEPR Discussion Papers 1862, C.E.P.R. Discussion Papers.
  8. Jacques Mairesse & Pierre Mohnen, 2004. "The Importance of R&D for Innovation: A Reassessment Using French Survey Data," NBER Working Papers 10897, National Bureau of Economic Research, Inc.
  9. d'Artis Kancs & Pavel Ciaian, 2011. "Modelling the Flow of Knowledge and Human Capital: A Framework of Innovative Capital," EERI Research Paper Series EERI_RP_2011_21, Economics and Econometrics Research Institute (EERI), Brussels.
  10. Becker, Sascha O. & Egger, Peter H. & Von Ehrlich, Maximilian, 2012. "Too much of a good thing? On the growth effects of the EU's regional policy," CAGE Online Working Paper Series 70, Competitive Advantage in the Global Economy (CAGE).
  11. Chang, Chia-Lin & Robin, Stéphane, 2008. "Public policy, innovation and total factor productivity: An application to Taiwan's manufacturing industry," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(3), pages 352-367.
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  13. Cincera, Michele, 1997. "Patents, R&D, and Technological Spillovers at the Firm Level: Some Evidence from Econometric Count Models for Panel Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 265-80, May-June.
  14. Furman, Jeffrey L. & Porter, Michael E. & Stern, Scott, 2002. "The determinants of national innovative capacity," Research Policy, Elsevier, vol. 31(6), pages 899-933, August.
  15. Raquel Ortega-Argilés & Mariacristina Piva & Lesley Potters & Marco Vivarelli, 2010. "Is Corporate R&D Investment In High-Tech Sectors More Effective?," Contemporary Economic Policy, Western Economic Association International, vol. 28(3), pages 353-365, 07.
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  17. Czarnitzki, Dirk & Kraft, Kornelius & Thorwarth, Susanne, 2009. "The knowledge production of 'R' and 'D'," Economics Letters, Elsevier, vol. 105(1), pages 141-143, October.
  18. Lesley Potters, 2009. "R&D in low-tech sectors," JRC-IPTS Working Papers on Corporate R&D and Innovation 2009-8, Institute of Prospective Technological Studies, Joint Research Centre.
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  20. Aminata SISSOKO, 2011. "R&D Subsidies And Firm-Level Productivity: Evidence From France," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 24 Oct 2013.
  21. Subal Kumbhakar & Raquel Ortega-Argilés & Lesley Potters & Marco Vivarelli & Peter Voigt, 2012. "Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors," Journal of Productivity Analysis, Springer, vol. 37(2), pages 125-140, April.
  22. Dietmar Harhoff, 1998. "R&D and Productivity in German Manufacturing Firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 6(1), pages 29-50.
  23. Ulrich Doraszelski & Jordi Jaumandreu, 2013. "R&D and Productivity: Estimating Endogenous Productivity," Review of Economic Studies, Oxford University Press, vol. 80(4), pages 1338-1383.
  24. Moncada-Paternò-Castello, Pietro & Ciupagea, Constantin & Smith, Keith & Tübke, Alexander & Tubbs, Mike, 2010. "Does Europe perform too little corporate R&D? A comparison of EU and non-EU corporate R&D performance," Research Policy, Elsevier, vol. 39(4), pages 523-536, May.
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  29. repec:wip:wpaper:1 is not listed on IDEAS
  30. Zvi Griliches, 1958. "Research Costs and Social Returns: Hybrid Corn and Related Innovations," Journal of Political Economy, University of Chicago Press, vol. 66, pages 419.
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