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Accumulation of R&D Capital and Dynamic Firm Performance: A Not-so-fixed Effect Model

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Abstract

Considering the observed patterns of R&D investment, we argue that a model which allows for a positive feedback from already acquired knowledge to the productiveness of current research, fits the empirical evidence better than the standard model that treats knowledge accumulation symmetrically to the accumulation of physical capital. We present an econometric framework consistent with a positive feedback in the accumulation of R&D capital. The empirical model is econometrically simple and less data-demanding than the standard framework. Our estimates show a significant positive effect of R&D on performance and a positive feedback effect from the stock of knowledge capital. We calculate the depreciation rate and the rate of return to knowledge capital for our alternative framework, and compare our estimated rate of return to results obtained within the standard framework.

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  • Tor Jakob Klette & Frode Johansen, 1996. "Accumulation of R&D Capital and Dynamic Firm Performance: A Not-so-fixed Effect Model," Discussion Papers 184, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:184
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    1. repec:eee:respol:v:46:y:2017:i:8:p:1505-1518 is not listed on IDEAS
    2. Raymond, Wladimir & Mairesse, Jacques & Mohnen, Pierre & Palm, Franz, 2015. "Dynamic models of R & D, innovation and productivity: Panel data evidence for Dutch and French manufacturing," European Economic Review, Elsevier, vol. 78(C), pages 285-306.
    3. Belderbos, Rene & Ito, Banri & Wakasugi, Ryuhei, 2008. "Intra-firm technology transfer and R&D in foreign affiliates: Substitutes or complements? Evidence from Japanese multinational firms," Journal of the Japanese and International Economies, Elsevier, vol. 22(3), pages 310-319, September.
    4. Klette, Tor Jakob & Griliches, Zvi, 2000. "Empirical Patterns of Firm Growth and R&D Investment: A Quality Ladder Model Interpretation," Economic Journal, Royal Economic Society, vol. 110(463), pages 363-387, April.
    5. Roper, Stephen & Hewitt-Dundas, Nola & Love, James H., 2004. "An ex ante evaluation framework for the regional benefits of publicly supported R&D projects," Research Policy, Elsevier, vol. 33(3), pages 487-509, April.
    6. Klette, Tor Jakob & Moen, Jarle & Griliches, Zvi, 2000. "Do subsidies to commercial R&D reduce market failures? Microeconometric evaluation studies1," Research Policy, Elsevier, vol. 29(4-5), pages 471-495, April.
    7. Roper, Stephen & Tapinos, Efstathios, 2016. "Taking risks in the face of uncertainty: An exploratory analysis of green innovation," Technological Forecasting and Social Change, Elsevier, vol. 112(C), pages 357-363.
    8. Bronwyn Hall & Francesca Lotti & Jacques Mairesse, 2009. "Innovation and productivity in SMEs: empirical evidence for Italy," Small Business Economics, Springer, vol. 33(1), pages 13-33, June.
    9. Lööf, Hans & Heshmati, Almas & Asplund, Rita & Nåås, Svein-Olav, 2001. "Innovation and Performance in Manufacturing Industries: A Comparison of the Nordic Countries," SSE/EFI Working Paper Series in Economics and Finance 0457, Stockholm School of Economics.
    10. Parisi, Maria Laura & Schiantarelli, Fabio & Sembenelli, Alessandro, 2006. "Productivity, innovation and R&D: Micro evidence for Italy," European Economic Review, Elsevier, vol. 50(8), pages 2037-2061, November.
    11. Andersson, Martin & Baltzopoulos, Apostolos & Lööf, Hans, 2012. "R&D strategies and entrepreneurial spawning," Research Policy, Elsevier, vol. 41(1), pages 54-68.
    12. Crespi, G., 2006. "Productivity And Firm Heterogeneity In Chile," PRUS Working Papers 36, Poverty Research Unit at Sussex, University of Sussex.
    13. Johansson, Börje & Lööf, Hans, 2008. "The Impact of Firm’s R&D Strategy on Profit and Productivity," Working Paper Series in Economics and Institutions of Innovation 156, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    14. Maliranta, Mika, 2002. "From R&D to Productivity Through Micro-Level Restructuring," Discussion Papers 795, The Research Institute of the Finnish Economy.

    More about this item

    Keywords

    Productivity; R&D; Knowledge Accumulation; Panel Data.;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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