The contribution of R&D to production efficiency in OECD countries: econometric analysis of industry-level panel data

Abstract

While research and development expenditures are considered a key to productivity growth and development, the question remains whether their contribution could depend on the particular countries' and industries' actual development levels and positions in global value chains. In this paper we analyse the relative contribution of R&D to the efficiency (productivity) on the industry and sector level in OECD countries using industry-level panel data and the stochastic frontier production function approach. The results indicate that R&D capital productivity enhancing effect increases with the level of technology; physical capital shows the opposite effect. The distribution of efficiency across industries shows remarkably different variances, reflecting different degrees of competition and the structure of value chains. Among different external factors, the share of labour with tertiary education at the national level showed a strong positive correlation with efficiency, while for other external factors the effect varied across the industries. The findings imply that in the design of R&D policy measures the structure of the industries needs to be considered.

Impact of Corporate R&D on Efficiency in OECD Industries

“…Hoskisson & Hitt, (1988); Hitt & Hoskisson (1997) and Chang & Hong, (2000) find that R&D intensity and operational performance are negative for firms diversifying in business growth. Similar findings are reported besides those that have been understood by policymakers and researchers around the world and reflected in different countries setting targets for innovation inputs and outputs, probably the most well-known one being the Lisbon target, setting the R&D expenditures to the 3% level of GDP by 2020 among the European Members States (Liik et al, 2014). It has also been questioned whether the same targets should be set for countries at different levels of development and different industrial structures (dominating low-tech or high-tech industries) and whether the indicators used to compare countries' innovation performance, like the European Innovation Scoreboard, are always meaningful (Schibany & Streicher, 2008;Liik et al, 2014).…”

“…Similar findings are reported besides those that have been understood by policymakers and researchers around the world and reflected in different countries setting targets for innovation inputs and outputs, probably the most well-known one being the Lisbon target, setting the R&D expenditures to the 3% level of GDP by 2020 among the European Members States (Liik et al, 2014). It has also been questioned whether the same targets should be set for countries at different levels of development and different industrial structures (dominating low-tech or high-tech industries) and whether the indicators used to compare countries' innovation performance, like the European Innovation Scoreboard, are always meaningful (Schibany & Streicher, 2008;Liik et al, 2014). Despite Kumbhakar et al, (2012) investigate the impact of corporate R&D activities on German Firms' performance, measured by labor productivity over the period 2000and Liik et al, (2014 analysed the impact of the R&D on industry productivity and level sector in OECD countries over the period 1987-2009, but more centered at Baltic countries level with the USA as the frontier.…”

“…The R&D impact analysis has been widely studied at industry and country levels in a more or less aggregate. Research and development (R&D) has been generally assumed to have has a positive impact on business productivity (Griliches, 1979;Kumbaker et al, 2012, Liik et al, 2014. Ortega-Argilés et al, (2014) Marsili (2001);von Tunzelmann and Acha (2005); Mairesse and Mohnen (2005) debate the alleged advantage of different kinds of industries, namely the low-tech over high-tech sectors in achieving additional and higher efficiency gains from R&D investment.…”

“…It has also been questioned whether the same targets should be set for countries at different levels of development and different industrial structures (dominating low-tech or high-tech industries) and whether the indicators used to compare countries' innovation performance, like the European Innovation Scoreboard, are always meaningful (Schibany & Streicher, 2008;Liik et al, 2014). Despite Kumbhakar et al, (2012) investigate the impact of corporate R&D activities on German Firms' performance, measured by labor productivity over the period 2000and Liik et al, (2014 analysed the impact of the R&D on industry productivity and level sector in OECD countries over the period 1987-2009, but more centered at Baltic countries level with the USA as the frontier. This paper contributes to the literature in two ways: First in the present post-subprime crisis scenario by which the European countries still have a very modest growth of their industries, it is crucial that the resources spent on R&D have an impact on innovation and technological progress in these countries, and, secondly, because the resources spent on R&D are scarce, it is crucial to know which contribute to the performance of the different industries in order to provide guidance to decision makers about the optimal allocation of R&D resources across industries and countries.…”

Intensity of Business Enterprise R&D Expenditure and High-Tech Specification in European Manufacturing Sector

“…They found evidence that the research and development expenditure have an impact on the high-tech manufacturing sector in that, academic research has a bigger growth effect on the sector than industrial research. Liik et al (2014) also examine the impact of R&D expenditure on industry level in OECD countries by using industry-level panel data for the period from 1987 to 2009 and the stochastic frontier production function approach. Their results show that R&D has productivity enhancing effects more in high-tech industries.…”