This paper studies the impact of process and product innovations introduced by firms on employment growth in these firms. A simple model that relates employment growth to process innovations and to the growth of sales separately due to innovative and unchanged products is developed and estimated using comparable firm-level data from France, Germany, Spain and the UK. Results show that displacement effects induced by productivity growth in the production of old products are large, while those associated with process innovations, which are likely to be compensated by price decreases, appear to be small. The effects related to product innovations are, however, strong enough to overcompensate these displacement effects.

Executive SummaryHow much does US-based R&D benefit other countries and through what mechanisms? We test the "technology sourcing" hypothesis that foreign research labs located on US soil tap into US R&D spillovers and improve home country productivity. Using panels of UK and US firms matched to patent data we show that UK firms who had established a high proportion of US-based inventors by 1990 benefited disproportionately from the growth of the US R&D stock over the next 10 years. We estimate that UK firms' Total Factor Productivity would have been at least 5% lower in 2000 (about $14bn) in the absence of the US R&D growth in the 1990s.We also find that technology sourcing is more important for countries and industries who have "most to learn". Within the UK, the benefits of technology sourcing were larger in industries whose TFP gap with the US was greater. Between countries, the growth of the UK R&D stock did not appear to have a major benefit for US firms who located R&D labs in the UK. The "special relationship" between the UK and the US appears distinctly asymmetric.Our result has interesting implications for policy. Governments are generally keen to promote higher levels of domestic R&D activity, and the Member States of the European Union have recently expressed an aspiration to raise the level of R&D spending within the EU to 3% of GDP. One of the proposed ways of achieving this is through R&D tax credits. Evidence suggests that one of the main impacts of these is to encourage relocation of R&D. Our results suggest that policies which seek to achieve this target by inducing multinational European firms to relocate their existing R&D efforts away from the US and towards Europe could be at least partly counterproductive, as they may reduce the ability of European firms to benefit from US R&D spillovers.From the point of view of the US, our results suggest that while US R&D does generate large spillover benefits for the rest of the world, foreign firms must actually invest in innovative activity in the US in order to reap the full returns. When it comes to international technology spillovers it seems there is no such thing as a completely free lunch. Abstract How much does US-based R&D benefit other countries and through what mechanisms? We test the "technology sourcing" hypothesis that foreign research labs located on US soil tap into US R&D spillovers and improve home country productivity. Using panels of UK and US firms matched to patent data we show that UK firms who had established a high proportion of US-based inventors by 1990 benefited disproportionately from the growth of the US R&D stock over the next 10 years. We estimate that UK firms' Total Factor Productivity would have been at least 5% lower in 2000 (about $14bn) in the absence of the US R&D growth in the 1990s. We also find that technology sourcing is more important for countries and industries who have "most to learn". Within the UK, the benefits of technology sourcing were larger in industries whose TFP gap with the US was greater. Betwe...

This paper studies the impact of process and product innovations introduced by firms on employment growth in these firms. A simple model that relates employment growth to process innovations and to the growth of sales separately due to innovative and unchanged products is developed and estimated using comparable firm-level data from France, Germany, Spain and the UK. Results show that displacement effects induced by productivity growth in the production of old products are large, while those associated with process innovations, which are likely to be compensated by price decreases, appear to be small. The effects related to product innovations are, however, strong enough to overcompensate these displacement effects.

We investigate the relationship between the location of private sector R&D labs and university research departments in Great Britain. We combine establishment-level data on R&D activity with information on levels and changes in research quality from the Research Assessment Exercise. The strongest evidence for co-location is for pharmaceuticals R&D, which is disproportionately located near to relevant university research, particularly 5 or 5* rated chemistry departments. This relationship is stronger for foreign-owned labs, consistent with multinationals sourcing technology internationally. We also find some evidence for co-location with lower rated research departments in industries such as machinery and communications equipment. Executive SummaryThis paper provides the first comprehensive evidence on the extent to which businesssector R&D activity is located in the vicinity of high quality university research departments in Great Britain. We exploit rich data on R&D activity in specific product groups at the establishment level, together with novel measures of the presence and quality of university research in relevant subject areas from the Research Assessment Exercise (RAE), at a fine level of geographic disaggregation. The findings shed new light on the links between public research and business R&D and the role of geographic proximity in public-private sector interactions, which are topical policy issues in the UK and elsewhere.The strongest evidence for co-location is for pharmaceuticals R&D, which is disproportionately located near to relevant university research, particularly high quality chemistry departments. This relationship is stronger for foreign-owned labs, consistent with multinationals sourcing technology internationally and confirming the importance of world-class centres of research for attracting increasingly footloose R&D investment. We also find some evidence for co-location with lower quality rated research departments in industries such as machinery and communications equipment, which raises the possibility that firms may benefit both from proximity to frontier basic university research and from more applied public sector research activity. The latter may be measured as low quality research for the purposes of the RAE and funding allocations, but our results suggest that it may play a role in some areas of technology transfer and even in attracting foreign-owned R&D investment. However, without further supporting evidence on the underlying economic mechanisms at work, it is difficult to make specific policy recommendations based on these results.