Legal Constraints or Aggregate Individual Characteristics? Examining Factors of State R&D Intensity and Spending in the United States

Abstract

This study empirically examines the impacts of legal constraints and aggregate individual characteristics on the funding and expenditure related to states' research and development (R&D). A system generalized method of moments (GMM) analysis is performed over a 20‐year period (2000–2019). The budgetary institutions, including rainy‐day funds, TELs, and debt limitations, significantly affect states' overall innovative capacity and R&D spending. They can hinder improvements in states' innovative capacity and R&D expenditure. On the other hand, states can circumvent these institutions and increase their R&D intensity and spending. States' development and human capacity foster their innovative capacity and R&D spending. Catholic work ethic is also crucial for enhancing state governments' innovative capacity and R&D expenditure. Legislative term limits reduce states' R&D intensity and expenditure. Meanwhile, economic downturns may motivate additional spending on R&D activities to promote states' innovative capacity and R&D spending. Fiscal burdens can prevent states from investing in R&D.