R&D and productivity: measurement issues and econometric results

Area of Science:

• Economics of Innovation
• Productivity Studies
• Science and Technology Policy

Background:

• National productivity accounts often fail to capture the full impact of R&D, particularly from sectors like space, defense, and health.
• Improvements in complex technological products and R&D's spillover effects are difficult to quantify, leading to underestimation in econometric studies.

Purpose of the Study:

• To assess the actual contribution of R&D to productivity growth in major U.S. manufacturing corporations.
• To investigate the relative importance of basic research versus applied research and the role of federal R&D funding.

Main Methods:

• Econometric analysis of R&D expenditures and productivity data for large U.S. manufacturing corporations.
• Analysis of the impact of different types of R&D (basic vs. applied) and funding sources (federal vs. private).

Main Results:

• A significant positive relationship was found between R&D investment and productivity growth.
• No evidence of a major decline in R&D's contribution to productivity was observed.
• Basic research demonstrated a larger impact on productivity than its proportion in total R&D spending would suggest.
• Federally financed R&D expenditures appeared to have a smaller role than implied by their share in total R&D.

Conclusions:

• R&D is a critical driver of productivity growth in U.S. manufacturing, though not fully reflected in national economic metrics.
• The findings underscore the importance of basic research for long-term productivity gains.
• Policy considerations should account for the differential impact of R&D types and funding sources on economic productivity.