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Types of R&D investment and firm productivity: UK evidence on heterogeneity and complementarity in rates of return

Types of R&D investment and firm productivity: UK evidence on heterogeneity and complementarity in rates of return

Solomon, Edna M. (2020) Types of R&D investment and firm productivity: UK evidence on heterogeneity and complementarity in rates of return. Economics of Innovation and New Technology. ISSN 1043-8599 (Print), 1476-8364 (Online) (In Press) (doi:https://doi.org/10.1080/10438599.2020.1846249)

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Abstract

Existing evidence on the impact of R&D on productivity is heterogenous and does not address the question of whether different types of R&D are complements or substitutes. The aim of this research is to open the R&D black box by providing fresh insights about how different R&D types affect productivity in different industrial and technological contexts in the UK. The model adopted allows for non-linearities between R&D and productivity and interactions between R&D types. The analysis makes use of micro data from the Office of National Statistics, comprising 8,284 firms from 1998 to 2012. The results show evidence of diminishing marginal returns to total R&D. This concave relationship also holds for intramural R&D, applied/experimental R&D and private R&D. These findings suggest that studies which do not allow for non-linear relationships between R&D and productivity could suffer from specification bias. The results also indicate complementarity between intramural and extramural R&D and between basic and applied/experimental research. Returns to publicly funded R&D are insignificant and there is neither complementarity nor substitution between publicly and privately funded R&D. The findings strengthen the case for modelling the sources of heterogeneity explicitly by taking account of non-linearities in and interactions between the productivity effects of different R&D types.

Item Type: Article
Uncontrolled Keywords: Firm productivity; R&D; Pavitt class; basic research; applied research; experimental research; inhouse research; extramural research; privately funded R&D; publicly funded R&D
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of International Business & Economics
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Last Modified: 11 Dec 2020 18:07
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
Selected for REF2021: None
URI: http://gala.gre.ac.uk/id/eprint/30341

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