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

30 Pages Posted: 15 Jun 2013

See all articles by d'Artis Kancs

d'Artis Kancs

Catholic University of Leuven (KUL) - Faculty of Economics and Business - LICOS Centre for Institutions and Economic Performance

Boriss Siliverstovs

KOF Swiss Economic Institute

Multiple version iconThere are 2 versions of this paper

Date Written: November 2, 2012

Abstract

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 signicantly 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.

Keywords: R&D investment, firm productivity, generalised propensity score

JEL Classification: C14, C21, D24, F23, O32

Suggested Citation

Kancs, d'Artis and Siliverstovs, Boriss, R&D and Non-Linear Productivity Growth of Heterogeneous Firms (November 2, 2012). Available at SSRN: https://ssrn.com/abstract=2279383 or http://dx.doi.org/10.2139/ssrn.2279383

D'Artis Kancs (Contact Author)

Catholic University of Leuven (KUL) - Faculty of Economics and Business - LICOS Centre for Institutions and Economic Performance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Boriss Siliverstovs

KOF Swiss Economic Institute ( email )

Weinbergstrasse 35
Zurich, 8092
Switzerland

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