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Firm R&D, Innovation, and Productivity in German Industry

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  • Vuong, Van Anh
  • Peters, Bettina
  • Roberts, Mark J.
  • Fryges, Helmut

Abstract

This paper investigates empirically rm investment behavior in research and development (R&D). Firms make investments in R&D in order to produce innovations. These innovations in turn improve the rm s future productivity level, pro tability and incentives to invest in R&D. Using German rm-level data from the manufacturing sector, we estimate a dynamic, structural model of the rm s choice to invest in R&D and quantify the bene t and cost of engaging in R&D. We nd that among rms that engage in R&D, process and product innovations create a signi cant improvement in their productivity. The cost for performing R&D differs across rms based on their size and R&D history. We compute the bene ts of R&D investment to the rm and nd that by taking the dynamic nature of the investment into account the real return to R&D is several times higher than the one time gain in rm productivity.

Suggested Citation

  • Vuong, Van Anh & Peters, Bettina & Roberts, Mark J. & Fryges, Helmut, 2013. "Firm R&D, Innovation, and Productivity in German Industry," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79760, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:79760
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    1. Hall, Bronwyn H. & Mairesse, Jacques, 1995. "Exploring the relationship between R&D and productivity in French manufacturing firms," Journal of Econometrics, Elsevier, vol. 65(1), pages 263-293, January.
    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.
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    Cited by:

    1. Gu, Tiantian, 2017. "U.S. multinationals and cash holdings," Journal of Financial Economics, Elsevier, vol. 125(2), pages 344-368.

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    More about this item

    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • 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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