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Academic Research on SR&ED – Abstracts

 

The research room at the New York public library.

Research Room at New York Public Library Photo by Diliff licensed under CC BY-SA 3.0

What are do companies that take advantage of R&D funding have in common? How is this funding distributed? What determines the effectiveness of research tax credits and innovation grants?

The answers to these questions have long been of interest to statisticians, economists, and policy academics. We’ve presented here a selection of research on the topic.

Note that since these are academic journal articles, most links will require login credentials. Alternatively, some may be available via Google Scholar.

Author(s)TitleJournalPublication yearVolumeIssuePagesDOILinkAbstract
Adams J.D., Chiang E.P., Jensen J.L.The Influence of Federal Laboratory R&D on Industrial ResearchThe Review Of Economics And Statistics20038541003-102010.1162/003465303772815899LinkAbstract
Audretsch D.B., Feldman M.P.R&D Spillovers and the Geography of Innovation and ProductionThe American Economic Review1996863630-640Link
Beise M., Stahl H.Public research and industrial innovations in GermanyResearch Policy1999284397-42210.1016/S0048-7333(98)00126-7LinkAbstract
Benfratello L., Sembenelli A.Research joint ventures and firm level performanceResearch Policy2002314493-50710.1016/S0048-7333(01)00122-6LinkAbstract
Berger P.G.Explicit and Implicit Tax Effects of the R&D Tax CreditJournal Of Accounting Research1993312131-171Link
Berman E.M.The economic impact of industry-funded university R&DResearch Policy1990194349-35510.1016/0048-7333(90)90018-2LinkAbstract
Bernstein J.I.The Structure of Canadian Interindustry R&D Spillovers and the Rates of Return to R&DThe Journal Of Industrial Economics1989373315-328LinkAbstract
Bernstein J.I.The Effect of Direct and Indirect Tax Incentives on Canadian Industrial R&D ExpendituresCanadian Public Policy1986123438-44810.2307/3550607LinkAbstract
Bernstein J.I.Costs of Production, Intra- and Interindustry R&D Spillovers: Canadian EvidenceThe Canadian Journal Of Economics1988212324-34710.2307/135304LinkAbstract
Bernstein J.I.Interindustry R&D Spillovers for Electrical and Electronic Products: The Canadian CaseEconomic Systems Research199791111-12510.1080/09535319700000007LinkAbstract
Bernstein J.I.Factor Intensities, Rates of Return, and International R&D Spillovers: The Case of Canadian and U.S. IndustriesAnnales De L'Institut Henri Poincare Probabilites Et Statistiques199849/50541-56410.2307/20076129LinkAbstract
Bernstein J.I., Mamuneas T.P.Structural Change and Economic DynamicsStructural Change And Economic Dynamics200617170-98LinkAbstract
Bernstein J.I., Nadiri M.I.Research and Development and Intraindustry Spillovers: An Empirical Application of Dynamic DualityThe Review Of Economic Studies198956186249-269LinkAbstract
Bernstein J.I., Yan X.Canadian-Japanese R&D Spillovers and Productivity GrowthApplied Economics Letters1996312763-767LinkAbstract
Billings B.A., Musazi B.G.,Moore J.W.The effects of funding source and management ownership on the productivity of R&DR&d Management2004343281-29410.1111/j.1467-9310.2004.00339.xLinkAbstract
Blanes J.V., Busom I.Who participates in R&D subsidy programs?: The case of Spanish manufacturing firmsResearch Policy200433101459-147610.1016/j.respol.2004.07.006LinkAbstract
Bonte W.R&D and Productivity: Internal vs. External R&D: Evidence from West Germany Manufacturing IndustriesEconomics Of Innovation And New Technology2003124343-360LinkAbstract
Bonte W.Does Federally Financed Business R&D Matter for US Productivity Growth?Applied Economics200335151619-1625LinkAbstract
Bonte W.Spillovers from Publicly Financed Business R&D: Some Empirical Evidence from GermanyResearch Policy200433101635-1655LinkAbstract
Brat D.A., Park W.G.Cross-Country R&D and Growth: Variations on a Theme of Mankiw-Romer-WeilEastern Economic Journal1996223345-354
Brouwer E., Poot T., Hertog, P., Grosfeld, T. Evaluation of a Major Dutch Tax Credit Scheme (WBSO) Aimed at Promoting R&DFTEVAL Conference On The Evaluation Of Government Funded R&d Activities2003
Browning E., Gronberg T., Liu L.Alternative Measures of the Marginal Cost of FundsEconomic Inquiry2000384591-599LinkAbstract
Busom, I.An Empirical Evaluation of The Effects of R&D SubsidiesEconomics Of Innovation And New Technology200092111-14810.1080/10438590000000006LinkAbstract
Callejon M., Garcia-Quevedo J.Public Subsidies to Business R&D: Do they Stimulate Private Expenditures?Environment And Planning. C, Government & Policy200570277121-141LinkAbstract
Capron H., Cincera M.Assessing the R&D Determinants and Productivity of Worldwide Manufacturing FirmsAnnales De L'institut Henri Poincare Probabilites Et Statistiques19984949/50565-587LinkAbstract
Capron H., Van Pottelsberghe B.Public support to business R&D: A survey and some new quantitative evidencePolicy Evaluation In Innovation And Technology, OECD19971026-27
Cohen W.M., Nelson R.R.,Walsh J.P.Links and Impacts: The Influence of Public Research on Industrial R&DManagement Science20024814239210.1287/mnsc.48.1.1.14273LinkAbstract
Cordes J.J.Tax incentives and R&D spending: A review of the evidenceResearch Policy1989183119-13310.1016/0048-7333(89)90001-2LinkAbstract
Cusmano L.European Research Joint Ventures and Innovation: A Microeconometric Analysis of RJV Impact on Firms' Patenting ActivityNelson And Winter Conference2001
Czarnitzki D., Licht G.Additionality of public R&D grants in a transition economyEconomics Of Transition2006141101-13110.1111/j.1468-0351.2006.00236.xLinkAbstract
Dahlby B.A Framework for Evaluating Provincial R&D Tax SubsidiesCanadian Public Policy200531145-5810.2307/3552594LinkAbstract
Diamond P.A., Mirrlees J.A.Optimal Taxation and Public Production I: Production EfficiencyThe American Economic Review197161142609Link
Diao X., Roe T., Yeldan E.Strategic Policies and Growth: An Applied Model of R&D- Driven Endogenous GrowthJournal Of Development Economics1999602343-380LinkAbstract
Ducharme L.M., Mohnen P.Externalities and R&D Social Rate of Return (With English summary)Economies Et Societes1996307193-217
Eisner R., Albert S.H., Sullivan M.A.The New Incremental Tax Credit for R&D: Incentive or Disincentive?National Tax Journal1984372171-183LinkAbstract
Evans C.Studying the Studies: An Overview of Recent Research into Taxation Operating CostsEJournal Of Tax Research200311LinkAbstract
Falk M.What Drives Business R&D Intensity Across OECD CountriesApplied Economics2006385533-547LinkAbstract
Fecher F.Effects Directs et Indirects de la R&D sur la Productivite: Une Analyse de l'Industrie Manufacturiere BelgeBrussels Economic Review1990128459-483
Fecher F., Perelman S.Total Factor Productivity, Technical Progress and Efficiency: A Comparative Study of 14 Belgian Industrial Sectors (With English summary)Annales D'Economie Et De Statistique1989131393-118LinkAbstract
Feldman M.P., Kelley M.Leveraging Research and Development: Assessing The Impact of the U.S. Advanced Technology ProgramSmall Business Economics2003202153-165
Folster S.Do Subsidies to R&D Actually Stimulate R&D Investment and cooperation?Research Policy1996243403-417LinkAbstract
Funk M.Basic Research and International SpilloversInternational Review Of Applied Economics2002162217-22610.1080/02692170110118911LinkAbstract
Globerman S.The Empirical Relationship Between R&D and Industrial Growth in CanadaApplied Economics197243181-192Link
Gonzalez X., Jaumandreu J., Pazo C.Barriers to Innovation and Subsidy EffectivenessThe Rand Journal Of Economics2005364930-950
Gonzalez X., Pazo C.Do Public Subsidies Stimulate Private R&D Spending?32nd Conference Of The European Association For Research In Industrial Economics (earie)2005323371-389LinkAbstract
Goolsbee A.Investment Subsidies and Wages in Capital Goods Industries: To the Workers Go the Spoils?National Tax Journal2003561153-165LinkAbstract
Goto A., Suzuki K.R&D Capital, Rate of Return on R&D Investment and Spillover ofR&D in Japanese Manufacturing IndustriesThe Review Of Economics And Statistics1989714555-564LinkAbstract
Griffith R., Redding S., Van Reenen JMeasuring the Cost-Effectiveness of an R&D Tax Credit for the UKFiscal Studies2001223375-399LinkAbstract
Griliches Z., Lichtenberg F.Interindustry Technology Flows and Productivity Growth: A ReexaminationThe Review Of Economics And Statistics1984662324-32910.2307/1925836LinkAbstract
Guellec D., Van Pottelsberghe B.The Impact of Public R&D Expenditure on Business R&DEconomics Of Innovation And New Technology2003123225-243LinkAbstract
Guellec D., Van Pottelsberghe B.From R&D to Productivity Growth: Do the Institutional Settings and the Source of Funds of R&D Matter?Oxford Bulletin Of Economics And Statistics2004663353-378LinkAbstract
Hanel P.L'Effet des Depenses en R&D sur la Productivitee de Travail au QuebecL'Actualite Economique1988643396-415LinkAbstract
Hanel P.R&D, Inter-industry and International Technology Spillovers and the Total Factor Productivity Growth of Manufacturing Industries in Canada 1974-1989Economic Systems Research20001233-361LinkAbstract
Harhoff D.R&D and Productivity in German Manufacturing FirmsEconomics Of Innovation And New Technology19986129-5010.1080/10438599800000012LinkAbstract
Hubert F., Pain N.Inward Investment and Technical Progress in the UK Manufacturing SectorScottish Journal Of Political Economy2001482134-147LinkAbstract
Hujer R., Radic D.Evaluating the Impacts of Subsidies on Innovation Activities in GermanyScottish Journal Of Political Economy2005524565-586LinkAbstract
Jaffe A.B.Demand and Supply Influences in R&D Intensity and Productivity GrowthThe Review Of Economics And Statistics1988703431-437LinkAbstract
Jaffe A.B., Lerner J.Reinventing Public R&D: Patent Policy and the Commercialization of National Laboratory TechnologiesThe Rand Journal Of Economics2001321167-198LinkAbstract
Klassen K.J.,Pittman J.A., Margaret P.A Cross-National Comparison of R&D Expenditure Decisions: Tax Incentives and Financial ConstraintsContemporary Accounting Research2004213639-680LinkAbstract
Klette T.J.R&D, Scope Economies and Plant PerformanceThe Rand Journal Of Economics1996273502-522LinkAbstract
Klette T.J., Moen J., Griliches Z.Do Subsidies to Commercial R&D Reduce Market Failures? Microeconometric Evaluation StudiesSmall Business Economics2000294471-495LinkAbstract
Klette T.J.,Johansen F.Accumulation of R&D Capital and Dynamic Firm Performance: A Not-so-Fixed Effect ModelAnnales D'Economie Et De Statistique19984949/50389-41910.2307/20076123LinkAbstract
Koga T.R&D Subsidy and Self-Financed R&D: The Case of Japanese High-Technology Start- UpsInternational Workshop On Empirical Studies On Innovation In Europe200324153-62LinkAbstract
Leo H.Determinants of Innovative Activities at the Firm LevelAnnales D'Economie Et De Statistique2003723285-318
Licht G., Zoz K.Patents and R&D: An Econometric Investigation Using Applications for German, European and US Patents by German CompaniesThe American Economic Review19984949/50329-360LinkAbstract
Link A.N.Basic Research Productivity Increase in Manufacturing: Additional EvidenceResearch Policy19817151111-1112
Link A.N., Paton D., Siegel D.S.An Analysis of Policy Initiatives to Promote Strategic Research PartnershipsManagerial And Decision Economics20023181459-1466LinkAbstract
Link A.N., Paton D., Siegel D.S.An econometric analysis of trends in research joint venture activityEmpirical Economics2005262149-15810.1002/mde.1209LinkAbstract
Los B., Verspagen B.R&D spillovers and productivity: Evidence from U.S. manufacturing microdataThe Review Of Economics And Statistics2000251127-14810.1007/s001810050007LinkAbstract
Luintel K.B., Khan M.Are International R&D Spillovers Costly for the United States?Journal Of Policy Modeling2004864896-91010.1162/0034653043125266LinkAbstract
Makki S.S., Thraen C.S., Tweeten L.G.Returns to American Agricultural Research: Results from a Cointegration ModelThe American Economic Review1999212185-21110.1016/S0161-8938(97)00059-8LinkAbstract
Mansfield E.The R&D Tax Credit and Other Technology Policy IssuesCanadian Public Policy1986762190-194Link
Mansfield E.Industrial R&D in Japan and the United States: A Comparative StudyResearch Policy1988782223-228Link
Mansfield E., Switzer L.How Effective are Canada's Direct Tax Incentives for R and D?Research Policy1985112241-246LinkAbstract
Mansfield E., Switzer L.The effects of R&D tax credits and allowances in CanadaCanadian Public Policy198514297-10710.1016/0048-7333(85)90017-4LinkAbstract
McCutchen W.W.Estimating the impact of the R&D tax credit on strategic groups in the pharmaceutical industryThe American Economic Review1993224337-35110.1016/0048-7333(93)90004-2LinkAbstract
McKenzie K.J.Tax Subsidies for R&D in Canadian ProvincesStructural Change And Economic Dynamics200531129-4410.2307/3552593LinkAbstract
Medda G., Piga C., Siegel D.S.Assessing the returns to collaborative research: Firm-level evidence from ItalyAmerican Economic Review200615137-5010.1080/1043859042000332213LinkAbstract
Minasian J.R.Research and Development, Production Functions and Rates of ReturnInternational Journal Of Production Economics196959280-85
Mohnen P., LŽpine NR&D, R&D spillovers and payments for technology: Canadian evidenceResearch Policy199121213-22810.1016/0954-349X(91)90013-ILinkAbstract
Monjon S., Waelbroeck P.Assessing spillovers from universities to firms: evidence from French firm-level dataResearch Policy20032191255-127010.1016/S0167-7187(03)00082-1LinkAbstract
Nadiri M.I.Technical Change, Returns to Scale, and the Productivity SlowdownEconomic Inquiry1981712314-319
Nadiri M.I., Prucha I.R.Sources of growth of output and convergence of productivity in major OECD countriesEconomic Inquiry1997521133-14610.1016/S0925-5273(95)00169-7Link
Nguyen S.V., Kokkelenberg E.C.Measuring Total Factor Productivity, Technical Change and the Rate of Returns to Research and DevelopmentRivista Di Politica Economica199624269-282LinkAbstract
Niininen P.Effect of Publicly and Privately Financed R&D on Total Factor Productivity GrowthThe Canadian Journal Of Economics200013156-68
Odagiri H.Research Activity, Output Growth, and Productivity Increase in Japanese Manufacturing IndustriesCanadian Journal Of Economics1985143117-130LinkAbstract
Odagiri H., Murakami N.Private and quasi-social rates of return on pharmaceutical R&D in JapanEvaluation1992214335-34510.1016/0048-7333(92)90032-YLinkAbstract
Parisi M.L., Sembellini A.Is Private R&D Spending Sensitive to its Price? Empirical Evidence on Panel Data for ItalyDefence And Peace Economics2003304357-377LinkAbstract
Park J.International and Intersectoral R&D Spillovers in the OECD and East Asian EconomiesEconomic Systems Research2004424739-75710.1093/ei/cbh093LinkAbstract
Park W.G.International R&D Spillovers and OECD Economic GrowthResearch Policy1995334571-59110.1111/j.1465-7295.1995.tb01882.xLinkAbstract
Peri G.Knowledge Flows and ProductivityEconomics Of Innovation And New Technology200421-59
Poole E., Bernard J.T.Defence Innovation Stock and Total Factor ProductivityThe Journal Of Political Economy1992252438-45210.2307/135873LinkAbstract
Russo B.A Cost-Benefit Analysis of R&D Tax IncentivesThe Review Of Economics And Statistics2004372313-335
Rye M.Evaluating the Impact of Public Support on Commercial Research and Development Projects: Are Verbal Reports of Additionality Reliable?The American Economic Review200282227-24810.1177/1358902002008002515LinkAbstract
Saal D.S.The Impact of Procurement-Driven Technological Change on U.S. Manufacturing Productivity GrowthInternational Journal Of Industrial Organization2001126537-568LinkAbstract
Sakurai N., Papaconstantinou G.,Ioannidis E.Impact of R&D and Technology Diffusion on Productivity Growth: Empirical Evidence for 10 OECD CountriesEconomics Of Innovation And New Technology19979181-10910.1080/09535319700000006LinkAbstract
Salter A.J., Martin B.R.The economic benefits of publicly funded basic research: a critical reviewAcademy Of Management Journal,2001303509-53210.1016/S0048-7333(00)00091-3LinkAbstract
Sanyal P.Understanding Patents: The Role of R&D Funding Sources and the Patent OfficeInternational Journal Of Industrial Organization2002126507-529
Schankerman M.The Effects of Double-Counting and Expensing on the Measured Returns to R&DJournal Of Public Economics1981633454-45810.2307/1924367Link
Scherer F.M.R&D and Declining Productivity GrowthJournal Of The American Taxation Association1983732215-218
Siegel D.S., Westhead P., Wright M.Assessing the impact of university science parks on research productivity: exploratory firm-level evidence from the United KingdomJournal Of Economic Surveys20032191357-136910.1016/S0167-7187(03)00086-9LinkAbstract
Sorensen A., Kongsted H.C., Marcusson, M.R&D, Public Innovation Policy, And Productivity: The Case Of Danish ManufacturingStructural Change And Economic Dynamics2003122163-178LinkAbstract
Spencer J.W.How Relevant is University-Based Scientific Research to Private High Technology Firms? A U.S.-Japan ComparisonThe Canadian Journal Of Economics2001LinkAbstract
Surendra, G., Gu, W., Lee, F. C.Information technology and labour productivity growth: an empirical analysis for Canada and the United StatesCanadian Journal Of Economics1999322384-407Link
Suzuki K.R&D spillovers and technology transfer among and within vertical keiretsu groups: Evidence from the Japanese electrical machinery industryInternational Journal of Industrial Organization1993114573-591LinkAbstract
Sveikauskas L.Technological Inputs and Multifactor Productivity GrowthThe review of economics and statistics1981632275-28210.2307/1924098Link
Swenson C.W.Some tests of the incentive effects of the research and experimentation tax creditJournal of public economics1992492203-21810.1016/0047-2727(92)90020-GLinkAbstract
Tillinger J.W.An Analysis of the Effectiveness of the Research and Experimentation Tax Credit in a q Model of ValuationJournal of the American Taxation Association1991132
Trajtenberg, M.The Welfare Analysis of Product Innovations, with an Application to Computed Tomography ScannersJournal of Political Economy1989972444-479LinkAbstract
Tsai D.H.Knowledge Spillovers and High-technology Clustering: Evidence from Taiwan's Hsinchu Science-Based Industrial ParkContemporary economic policy2005231116-12810.1093/cep/byi010LinkAbstract
Van Pottelsberghe B., Lichtenberg, F.R. International R&D Spillovers: A CommentEuropean Economic Review19984281483-1491LinkAbstract
Wieser R.Research and Development Productivity and Spillovers: Empirical Evidence at the Firm LevelJournal of economic surveys2005194587-621
Wolff E.N., Ishaq Nadiri MSpillover effects, linkage structure, and research and developmentStructural Change and Economic Dynamics199342315-33110.1016/0954-349X(93)90022-CLinkAbstract
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Lester, J.Benefit-cost analysis of R&D support programsCanadian Tax Journal/Revue Fiscale2012604793-836LinkAbstract
Colombo, M. G., Grilli, L., & Murtinu, S.R&D subsidies and the performance of high-tech start-upsEconomics Letters201112197-99http://dx.doi.org/10.1016/j.econlet.2011.03.007LinkAbstract
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Baghana, R., & Mohnen, PEffectiveness of R&D tax incentives in small and large enterprises in QuebecSmall Business Economics200933191-10710.1007/s11187-009-9180-zLinkAbstract
Salazar, M., & Holbrook, ACanadian science, technology and innovation policy: The product of regional networking? Regional Studies20074181129-1141Abstract
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Abstracts

The Influence of Federal Laboratory R&D on Industrial Research

Adams J.D., Chiang E.P., Jensen J.L.

This paper studies the influence of R&D in the U.S. federal laboratory system, the world’s largest, on firm research. Our results are based on a sample of 220 industrial research laboratories that work with a variety of federal laboratories and agencies and are owned by 115 firms in the chemicals, machinery, electrical equipment, and motor vehicles industries. Using an indicator of their importance to R&D managers, we find that cooperative research and development agreements (CRADAs) dominate other channels of technology transfer from federal laboratories to firms. With a CRADA industry laboratories patent more, spend more on company-financed R&D, and devote more resources to their federal counterparts. Without this influence, patenting stays about the same, and only federally funded R&D increases, mostly because of government support. The Stevenson-Wydler Act and amendments during the 1980s introduced CRADAs, which legally bind federal laboratories and firms together in joint research. In theory the agreements could capitalize on complementarities between public and private research. Our results support this perspective and suggest that CRADAs may be more beneficial to firms than other interactions with federal laboratories, precisely because of the mutual effort that they demand from both parties.

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Public research and industrial innovations in Germany

Beise M., Stahl H.

This paper deals with the effects of publicly funded research at universities, polytechnics and federal research laboratories on industrial innovations in Germany. We discuss the characteristics of companies that benefit from the findings of public research institutions. In questioning 2300 companies, we found that less than one-tenth of product- or process-innovating firms introduced innovations between 1993 and 1995 that would not have been developed without public research. These new products amount to approximately 5% of all new product sales. Universities are cited by firms with publicly supported innovations as the most important source, although publicly financed laboratories get almost as many citations. Big science laboratories are almost invisible, suggesting that their technology transfer to industrial firms still lacks effectiveness. Firms also tend to cite research institutions that are located close to the firm. But contrary to the widely held opinion that proximity to public research institutions does promote collaboration between firms and public research and increase the amount of received knowledge spillovers, we found no higher probability of publicly supported innovations for firms in Germany that are located near universities or polytechnics. However, the firm’s own R&D activities instead support the ability to absorb the findings of public research and turn them into innovations. Additionally, firms with high R&D intensities cite remote public research institutes more frequently than less R&D-intensive firms, suggesting that in Germany, high-technology does not depend on co-location of public and private research.

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Research joint ventures and firm level performance

Benfratello L., Sembenelli A.

In this paper, we test whether participation in EU sponsored research joint ventures (RJVs) has a positive impact on participating firms’ performance. We apply our statistical methodology to RJVs sponsored under two different programs: EUREKA and (3rd and 4th) Framework Programs for Science and Technology (FPST). Overall results show quite a different impact for firms participating in the two programs: a positive association between participation, labour productivity and price cost margin in the case of EUREKA, while firms participating FPST RJVs do not show any clear pattern.

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The economic impact of industry-funded university R&D

Berman E.M.

In recent years, industry has increased its direct funding of university R&D. This article examines whether such “collaborative” R&D leads to increases in technological innovation in industry. Data are analyzed for the years 1953 through 1986. It is found that direct industry funding of university research is associated with subsequent increases in industry R&D expenditures. These expenditures include funding from both federal and industry sources. This increase in R&D expenditures occurs with a median lag of five years. Rival hypotheses are examined, such as the effect of general university research expenditures. However, these hypotheses are rejected. This article concludes by raising significant implications for policy.

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The Structure of Canadian Interindustry R&D Spillovers and the Rates of Return to R&D

Bernstein J.I.

This paper estimates the effects of inter-industry R & D spillovers on the production cost of nine major Canadian industries. Production costs in all nine are affected by spillovers and six industries are influenced by at least two different source industries. Rates of return to R & D capital for each industry are also estimated. Private rates of return on R & D are at least two and a half times those on physical capital. Rates of return on R & D, inclusive of spillovers, are also computed: for industries which are major sources of spillover the spillover-inclusive returns are at least twice the private returns.

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The Effect of Direct and Indirect Tax Incentives on Canadian Industrial R&D Expenditures

Bernstein J.I.

On sait que le rendement industriel est influence par les investissements en recherche et developpement. En consequence, les pays occidentaux industralises, dont le Canada, cherchent a stimuler les depenses de recherche et de developpement par le moyen d’incitations fiscales offertes a l’industrie. L’auteur de cet article a voulu evaluer les effets directs et indirects des incitations fiscales sur les depenses de recherche et de developpement au moyen d’une etude econometrique de la production et des investissements d’entreprises canadiennes. Les resultats montrent qu’en l’absence de croissance economique, le credit d’impot pour investissements de recherche et de developpement et les allocations speciales se soldent par 0,80 $ de depenses additionnelles en R&D pour chaque dollar d’impots auquel renonce le gouvernement. Si la production economique augmente, les depenses supplementaires au titre de la recherche et du developpement depassent les couts encourus par le gouvernement. En outre, le credit fiscal pour immobilisations industrielles est un incitatif indirect qui provoque une augmentation des depenses de R&D pouvant atteindre environ 10 pour cent de l’augmentation obtenue per les incitations directes. /// Industrial performance is influenced by the rate of investment in research and development (R&D). Western developed countries, and Canada in particular, have attempted to stimulate industrial R&D expenditures through the use of tax incentives. The purpose of this paper is to estimate the effects of both direct and indirect tax incentives on R&D expenditures. The results are based on an econometric study of production and investment of Canadian firms. The results show that when there is no growth in the economy the R&D investment tax credit and special allowance generate about $.80 of additional R&D expenditures per dollar of foregone tax revenues to the government. When ouput expands, the additional R&D expenditures increase by more than the dollar cost to the government. In addition, the business fixed investment tax credit is an indirect incentive which causes R&D expenditures to increase by about 10 per cent of the increase obtained for the direct incentives.

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Costs of Production, Intra- and Interindustry R&D Spillovers: Canadian Evidence

Bernstein J.I.

This paper presents estimates of the effects of intra- and interindustry R&D investment spillovers on the costs and structure of production. The social rates of return to R&D investment and their deviation from the private rate are also estimated. This is the first time that the consequences of R&D spillovers are evaluated for Canadian industries. Intra- and interindustry spillovers decrease unit costs of production. Moreover, interindustry effects are substantially more elastic. Generally a firm’s own R&D capital is a substitute for R&D capital obtained freely via spillovers. However, for firms operating in industries with relatively larger R&D propensities, their own R&D capital and the intra-industry spillover are complementary. In all industries the social rate of return greatly exceeds the private return, and the contribution of the interindustry spillover to the social return is virtually the same and small for all industries. Thus differentials between social and private returns and between social returns across industries depend on the extent of the intra-industry spillovers. /// Les couts de production et les effets intra- et inter-industriels de debordement de la R&D: resultats canadiens. Ce memoire presente des estimes des effets de debordement (intra- et inter-industriels) et l’investissement en R&D sur les couts et la structure de production. On evalue les taux de rendement social de l’investissement en R&D et l’ecart par rapport au taux de rendement prive. C’est la premiere fois qu’on evalue les consequences des effets de debordement de la R&D dans les industries canadiennes. Les effets de debordement (intra- et inter-industriels) reduisent les couts de production unitaires. De plus les effets inter-industriels sont substantiellement plus elastiques. En general, le capital de R&D qu’une firme a en propre est un substitut pour le capital de R&D obtenu gratuitement via les effets de debordement. Cependant, pour ce qui est des entreprises operant dans des industries o√π les propensites a faire de la R&D sont relativement importantes, il y a complementarite entre le capital de R&D qu’une firme a en propre et les effets de debordement intra-industriels. Dans toutes les industries, le taux de rendement social est plus grand que le taux prive, et la contribution des debordements inter-industriels au taux de rendement social est a peu pres le meme et faible pour toutes les industries. Donc, les ecarts entre taux de rendement social et prive et entre les taux de rendement social d’une industrie a l’autre sont attribuables aux effets de debordement intra-industriels.

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Interindustry R&D Spillovers for Electrical and Electronic Products: The Canadian Case

Bernstein J.I.

This paper estimates the effects of interindustry R&D spillovers on the cost and production structure for 10 Canadian manufacturing industries. Because of their high-tech nature and productivity performance, spillovers from electrical and electronic products are distinguished from other spillover sources. Generally, spillovers from electrical and electronic products generate cost reductions and render production processes for Canadian manufacturing industries more capital intensive (i.e. either more physical or R&D capital intensive). Social rates of return for R&D capital are calculated for all 10 industries. The social rates are 5-11 times greater than are the private rates. Indeed, the social rates are high for all the industries. This implies that the electrical and electronic products industry is an important interindustry spillover source but, like other industries, a major spillover-using industry.

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Factor Intensities, Rates of Return, and International R&D Spillovers: The Case of Canadian and U.S. Industries

Bernstein J.I.

This paper estimates the effects of both intranational and intenational spillovers on production cost, and factor intensities (including R&D intensity) for eleven manufacturing industries in the U.S., and Canada. In addition, social rates of return to R&D capital are calculated, and decomposed into private rates of return, and the extra-returns due to intranational and international spillovers. International spillovers are usually cost reducing, and increase R&D and physical capital intensities. International spilovers are generally labor and intermediate input intensity reducing. In Canada, international spillover effects are more elastic than domestic spillover elasticities. In the U.S. the same relationship exists, but is not as pronounced. Social rates of return to R&D capital are substantially above the private rates in both Canada and U.S. In Canada, international spillovers generally account for a greater percentage of the social returns relative to the domestic spillovers. In the U.S. the converse occurs. Canadian social rates are from two and a half to twelve times greater than private returns, while U.S. social returns are from three and a half to ten times greater than the private rates. /// Ce texte evalue les effets des externalites intranationales et internationales sur les couts de production et les intensites de facteurs pour onze industries manufacturieres canadiennes et americaines. On calcule aussi les externalites internationales des taux de rendement sociaux de la R&D, qui reduisent les couts et augmentent la R&D et l’intensite de capital physique

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Structural Change and Economic Dynamics

Bernstein J.I., Mamuneas T.P.

This paper estimates R&D depreciation rates for U.S. R&D intensive industries. R&D annually depreciates at; 18% for chemical products, 26% for nonelectrical machinery, 29% for electrical products, and 21% for transportation equipment. These depreciation rates lead to new estimates of the marginal (gross of depreciation) returns to R&D capital; 0.25 for chemical products, 0.31 for nonelectrical machinery, 0.34 for electrical products, and 0.27 for transportation equipment. R&D investment significantly contributed to productivity growth; virtually 100% in chemical products, 55% in nonelectrical machinery, 38 percent in electrical products, and 84% in transportation equipment.

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Research and Development and Intraindustry Spillovers: An Empirical Application of Dynamic Duality

Bernstein J.I., Nadiri M.I.

In this paper we estimate a model of production and investment based on the theory of dynamic duality. We are particularly interested in the effects of R&D spillovers and in calculating the social and private rates of return. There are three effects associated with the intra-industry R&D spillover. First, costs decline as knowledge expands for the externality-receiving firms. Second, production structures are affected, as factor demands change in response to the spillover. Third, the rates of capital accumulation are affected by the R&D spillover. These cost-reducing, factor-biasing and capital adjustment effects are estimated for four industries.

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Canadian-Japanese R&D Spillovers and Productivity Growth

Bernstein J.I., Yan X.

R&D spillovers contribute to total factor productivity (TFP) growth. This paper examines the contribution of intranational and international R&D spillovers between Canada and Japan to industrial TFP growth. TFP growth is measured and decomposed for 10 Canadian and Japanese manufacturing industries. Generally, spillovers contribute to productivity gains. We find that domestic spillovers contribute more than international spillovers. Moreover, in industries where marginal propensities to spend on R&D are relatively lower, domestic spillovers reduce TFP growth.

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The effects of funding source and management ownership on the productivity of R&D

Billings B.A., Musazi B.G.,Moore J.W.

This study investigates the influence of the source of R&D funds and management ownership on R&D productivity. The lagged effect of the source of R&D funds on R&D output is investigated for a sample of US manufacturing firms in five industries over the 1996-99 period. Estimates based on 779 firm-years show that R&D productivity increases with the proportion of stock held by managers and directors of firms primarily in the Other Electronics industry. The estimates also show that recipients of government-sponsored R&D funds in the Chemicals industry have lower levels of output (sales) for each dollar committed to R&D. In addition, output for firms in the Chemicals industry worsens as management stockholding increases, implying an agency cost rationale for the observed difference in output. The implication is that firms with high manager-owner content are less productive with government-sponsored R&D than with company-financed R&D. The reported results suggest that potential agency costs should be incorporated in government-sponsored R&D contracts. It also suggests that the source of R&D funds should be disclosed and incorporated into the valuation of intangible assets attributable to research and development.

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Who participates in R&D subsidy programs?: The case of Spanish manufacturing firms

Blanes J.V., Busom I.

Empirical evidence on the effectiveness of R&D subsidies to firms has produced mixed results so far. One possible explanation is that firms and project selection rules may be quite heterogeneous both across agencies and across industries, leading to different outcomes in terms of the induced additional private effort. Here we focus on the participation stage. Using a sample of Spanish firms, we test for differences across agencies and industries. Our results suggest that firms in the same industry face different hurdles to participate in different agencies’ programs, that participation patterns may reflect a combination of agency goals, and that patterns differ across high-tech and low-tech industries.

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R&D and Productivity: Internal vs. External R&D: Evidence from West Germany Manufacturing Industries

Bonte W.

The paper explores the productivity effects of investment in external (contract) vs. internal (in-house) R&D in a sample of West-German Manufacturing Industries. The results provide strong evidence of a positive relationship between productivity and the share of external R&D in total R&D. This result is robust to alternative econometric specifications. Thus, findings suggest that the decision between internal and external R&D does matter. Moreover, results imply a nonlinear relationship between productivity and the share of external R&D for higher-technology industries, hinting at decreasing productivity effects of an increasing share of external in total R&D.

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Does Federally Financed Business R&D Matter for US Productivity Growth?

Bonte W.

This paper investigates the impact of federally financed business R&D on productivity of the US nonfarm business sector. Results of a cointegration analysis suggest that a long run relation between productivity and total (privately and federally financed) R&D capital stock exists. Moreover, the estimation results do not confirm the finding of previous empirical studies that the productivity effects of federally financed business R&D are lower compared with those of privately financed business R&D.

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Spillovers from Publicly Financed Business R&D: Some Empirical Evidence from Germany

Bonte W.

This paper investigates the effects of interindustry R&D spillovers from publicly financed business R&D on private R&D efforts and productivity using data of West German manufacturing industries. The results suggest that it is important to distinguish between the effects of spillovers from privately and publicly financed business R&D. In particular, estimation results provide evidence of productivity-enhancing effects of spillovers from privately financed R&D while results are less clear-cut for publicly financed R&D. Moreover, there is some empirical evidence that private R&D efforts of higher-technology industries are stimulated by spillovers from privately financed R&D but not by spillovers from publicly financed R&D. However, public funding of R&D in higher-technology industries seems to induce private R&D investments within these industries.

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Alternative Measures of the Marginal Cost of Funds

Browning E., Gronberg T., Liu L.

This article reconciles the use of two different marginal cost-of-funds (MCF) measures by resorting to alternative marginal benefit measures. It demonstrates how the alternative MCF measures can be properly applied to two classic problems in expenditure analysis: local cost-benefit project evaluation and the second-best public good level question. Relative strengths of the two MCF approaches in addressing the two problems are identified.

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An Empirical Evaluation of The Effects of R&D Subsidies

Busom, I.

R&D subsidies are a common tool of technology policy, but little is known about the effects they have on the behavior of firms. This paper presents evidence on the effects that R&D subsidies have on the R&D effort of recipients, and on the probability that a firm will participate in a program granting R&D subsidies. The empirical model consists of a system of equations: a participation equation; and an R&D effort equation. Endogeneity of public funding is controlled for. Estimates are obtained with a cross-section sample of Spanish firms. The main findings are that: 1) small firms are more likely to obtain a subsidy than large firms, probably reflecting one of the public agency’s goals; 2) overall, public funding induces more private effort, but for some firms (30% of participants) full crowding out effects cannot be ruled out, and 3) firm size remains related to effort, whether or not a firm gets public funding.

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Public Subsidies to Business R&D: Do they Stimulate Private Expenditures?

Callejon M., Garcia-Quevedo J.

The purpose of this paper is to obtain new evidence about a fundamental question of empirical studies on technology policy. Is public R&D a complement to or a substitute for private R&D? We examine, at an industry level, the relationship between private R&D expenditures and public subsidies in Spain, using panel data and controlling the interindustry differences in technological opportunities. The results suggest that public subsidies have complemented private R&D. This is an interesting result because technology policy was reoriented in the 1990s with a reduction of direct government subsidies for R&D and an increase in tax incentives.

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Assessing the R&D Determinants and Productivity of Worldwide Manufacturing Firms

Capron H., Cincera M.

This paper analyzes the relationship between R&D activity, spillovers and productivity at the firm level. Particular attention is put on the formalization of technological spillovers. The analysis is based upon a new dataset composed of 625 worldwide R&D-intensive manufacturing firms whose information has been collected for the period 1987-1994. Given the panel data structure of the sample, ad hoc econometric techniques which deal with both firm’s unobserved heterogeneity and weak exogeneity of the right hand-side variables are implemented. The empirical results suggest that spillover effects influence significantly firm’s productivity. Nevertheless the effects differ substantially among the pillars of the Triad. The United States are mainly sensitive to their national stock of spillovers while Japan appears to draw from the international stock. On its side, Europe shows a tendency to internalize spillovers. /// Cet article quantifie la relation entre la R&D, les externalites technologiques et la productivite au niveau de la firme. Une attention particuliere est apportee a la formalisation des externalites. L’analyse se fonde sur un nouvel echantillon compose de 625 entreprises mondiales intensives en R&D dans le secteur manufacturier. L’information collectee couvre la periode 1987 a 1994. Etant donne la structure de donnees de panel caracterisant l’echantillon, des methodes econometriques prenant en compte l’heterogeneite des entreprises et l’exogeneite faible des regresseurs sont mises en oeuvre. II resulte des estimations que les externalites influencent de maniere significative la productivite des entreprises. Neanmoins ces effets apparaissent substantiellement differents au sein des piliers de la Triade. Les Etats-Unis sont principalement sensibles a leur propre stock national d’externalites tandis que le Japon semble puiser dans le stock international. De son cote, l’Europe montre des faiblesses a internaliser les externalites.

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Links and Impacts: The Influence of Public Research on Industrial R&D

Cohen W.M., Nelson R.R.,Walsh J.P.

In this paper, we use data from the Carnegie Mellon Survey on industrial R&D to evaluate for the U.S. manufacturing sector the influence of äóìpublicäó(i.e., university and government R&D lab) research on industrial R&D, the role that public research plays in industrial R&D, and the pathways through which that effect is exercised. We find that public research is critical to industrial R&D in a small number of industries and importantly affects industrial R&D across much of the manufacturing sector. Contrary to the notion that university research largely generates new ideas for industrial R&D projects, the survey responses demonstrate that public research both suggests new R&D projects and contributes to the completion of existing projects in roughly equal measure overall. The results also indicate that the key channels through which university research impacts industrial R&D include published papers and reports, public conferences and meetings, informal information exchange, and consulting. We also find that, after controlling for industry, the influence of public research on industrial R&D is disproportionately greater for larger firms as well as start-ups.

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Tax incentives and R&D spending: A review of the evidence

Cordes J.J.

Since 1981, U.S. firms have been allowed to claim a tax credit for R&D spending in excess of some base amount. This paper assesses the evidence gathered to date about the effectiveness of the R&D tax credit in the United States. There is considerable evidence that the R&D tax credit has had some effect on the behavior of American firms in the early 1980s. But it is not as yet clear how much of the initial response of firms to the credit is due to increases in total R&D as opposed to increases in R&D that is qualified for the R&D credit. Moreover, different empirical approaches produce substantially different estimates of the size of the effect of the R&D credit. Analyses based on time series data imply that the credit has had a substantial effect on R&D spending. However, indirect evidence based on estimates of the price elasticity of demand for R&D, as well as studies based on more direct evidence from survey data and corporate tax returns imply that the effect of the credit has been rather modest. There are several ways in which these divergent estimates of the size of firms’ responses can be reconciled. However, each suggested reconciliation points toward using the more modest estimates to gauge the effects of a permanently enacted incentive for R&D. These estimates imply that had the incremental 25 percent R&D credit been made permanent, it would have stimulated between $0.35 and $0.93 of additional company-funded R&D spending per each $1 of tax revenue forgone.

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Additionality of public R&D grants in a transition economy

Czarnitzki D., Licht G.

This paper examines the input and output additionality of public R&D subsidies in Western and Eastern Germany. We estimate the impact of public R&D grants on firms’ R&D and innovation input. Based on the results of this first step we compare the impact of publicly funded private R&D on innovation output with the output effect of R&D funded out of firms’ own pockets. We employ microeconometric evaluation methods using firm-level data derived from the Mannheim Innovation Panel. Our results point towards a large degree of additionality in public R&D grants with regard to innovation input measured as R&D expenditures and innovation expenditures, as well as with regard to innovation output measured by patent applications. Input additionality has been more pronounced in Eastern Germany during the transition period than in Western Germany. However, R&D productivity is still larger for the established Western German innovation system than for Eastern Germany. Hence, a regional redistribution of public R&D subsidies might improve the overall innovation output of the German economy.

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A Framework for Evaluating Provincial R&D Tax Subsidies

Dahlby B.

Les reactions en chaine provoquees par les activites d’une firme de Recherche et Developpement (R&D) fournissent une justification a l’encouragement fiscal donne a R&D. Cet article fournit un cadre permettant d’incorporer le taux de rendement externe de R&D, l’attention portee a la fiscalite en matiere de depenses pour R&D et le cout marginal, pour le gouvernement, des fonds publics, dans l’evaluation des programmes provinciaux d’encouragement fiscal pour R&D. En nous servant de ce cadre, nous constatons qu’un dollar d’augmentation de l’encouragement fiscal doit generer pres de 2 $ de fonds supplementaires pour R&D et que le taux de rendement externe doit etre tres proche de 30 pour cent afin de justifier une subvention fiscale provinciale pour la Recherche et le Developpement, si le cout marginal de financement est de 1,40 $ pour le gouvernement provincial. /// The spillover effects from a firm’s research and development (R&D) activities provide a rationale for R&D tax incentives. This paper provides a framework for incorporating the external rate of return on R&D, the tax sensitivity of R&D spending, and the government’s marginal cost of public funds in the evaluation of provincial R&D incentive programs. Using this framework, we find that an additional dollar of tax incentive has to generate close to $2.00 of additional R&D and the external rate of return has to be very close to 30 percent in order to justify a provincial tax subsidy for R&D if the provincial government’s marginal cost of funds is $1.40.

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Strategic Policies and Growth: An Applied Model of R&D- Driven Endogenous Growth

Diao X., Roe T., Yeldan E.

We introduce and explore a general equilibrium model with R&D-driven endogenous growth, whose antecedents are the models of Romer (1990) [Romer, P.M., 1990. Endogenous technological change. Journal of Political Economy, 98, S71-102] and Grossman and Helpman (1991) [Grossman, G.M., Helpman E., 1991. Innovation and Growth in the Global Economy, The MIT Press, Cambridge]. Utilizing evidence from recent econometric studies on sources of growth, the model also accounts explicitly for cross-border technological spillovers. The model is specified and calibrated to data from Japan, and is solved to obtain both the transitional and the steady-state equilibria. We explore the effects of selective trade and R&D promotion policies on long-run growth and social welfare. The model results suggest that while a strategic trade policy has little effect on re-allocating resources into domestic R&D activities, it can significantly affect the cross-border spillovers of technological knowledge, which, in turn, stimulates growth. We find that trade liberalization may cause the growth rate to fall and lead to a loss of social welfare in the long-run, although it improves welfare in the short-run. R&D promotion policies stimulate growth by inducing private agents to allocate more resources to domestic R&D, as well as to take greater advantage of global R&D spillovers. Here, we find significantly high growth effects together with sizable gains in social welfare at low incidence to tax payers.

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The New Incremental Tax Credit for R&D: Incentive or Disincentive?

Eisner R., Albert S.H., Sullivan M.A.

The new incremental tax credit for R&D has a limited potential for stimulating expenditures, and in some cases actually discourages them. The credit is pro-cyclical and sensitive to inflation. An initial surge in credit claims arises from shifts in the proportions of R& D deemed qualified rather than increases in total R&D. From 1983 to 1985 the credit is likely to cost over $1 billion annually, exceeding initial Treasury estimates. A number of modifications to the credit would increase its incentive effects; the most important of these would redesign the firmspecific, moving-average base so that increases in current expenditures would not reduce future credits.

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Studying the Studies: An Overview of Recent Research into Taxation Operating Costs

Evans C.

Studies into the operating costs of taxation compliance costs for taxpayers and administrative costs for revenue authorities have flourished in recent years. This paper provides an overview of these studies, and reveals both the breadth and the depth of the research in this area. The paper focuses upon studies that have taken place in the last 20 years or so, although the paper also briefly considers the broader historical context, including the reasons why research into tax operating costs has apparently flourished after some initial neglect. A summary of most of the major (and some minor) administrative and compliance cost studies that have been published (and some that have not been published) since 1980 is contained in an appendix. This summary highlights the geographical spread of operating cost research, the variety of taxes and aspects of tax systems that have been studied, and the range of methodologies employed. The outcomes of the research are also summarised. A key thesis of the paper is that tax law design should not take place without clear recognition of the impact of the proposed changes on the operating costs of the tax system. Sensible tax law design must be informed by an understanding of the impact that design will have on the burden that taxpayers will face and the administrative costs that the revenue authority will be required to carry.

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What Drives Business R&D Intensity Across OECD Countries

Falk M.

This paper empirically investigates the potential determinants of business-sector R&D intensity using a panel of OECD (countries for the period of 1975–2002 with data measured as five-year averages). Estimates using a system GMM estimator controlling for endogeneity show a high degree of persistence in business-sector R&D expenditures. Tax incentives for R&D have a significant and positive impact on business R&D spending regardless of the specification and estimation techniques. Furthermore, we find that expenditures for R&D performed by universities are significantly positively related to business enterprise sector expenditures on R&D indicating that public sector R&D and private R&D are complements. Direct R&D subsidies and the high-tech export share are significantly positively related to business-sector R&D intensity, but these effects are only significant using the first-differenced GMM estimator. The static fixed effects results show that countries characterised by strong patent rights appear to have higher R&D intensities, but this effect is no longer significant in the dynamic panel data model.

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Total Factor Productivity, Technical Progress and Efficiency: A Comparative Study of 14 Belgian Industrial Sectors (With English summary)

Fecher F., Perelman S.

L’objet de cette etude, basee sur l’estimation econometrique frontieres de production deterministes, est d’etudier et de comparer, au cours de la periode 1977-1983, 14 secteurs de l’industrie manufacturiere belge, a partir d’un echantillon compose d’un millier d’entreprises. On s’interesse en particulier a la decomposition des gains en productivite en progres technique et efficacite, a la comparaison des niveaux d’efficacite technique atteints au sein de chaque secteur, ainsi qu’a l’impact des depenses en recherche et developpement sur ces performances. /// The purpose of this study based on the econometric estimation of deterministic frontier production functions is to examine and to compare for the period 1977-1983, 14 sectors of the Belgian manufacturing industry from a sample of a thousand firms. We are especially interested in breaking down total factor productivity changes into technological progress and changes in technical efficiency, comparing efficiency levels in every sector, and in defining the impact of R-D spending on these performances.

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Do Subsidies to R&D Actually Stimulate R&D Investment and cooperation?

Folster S.

A popular view in the industrial policy debate is that cooperation among firms’ R&D departments should be encouraged. The European Community, Japan and the US all subsidize research cooperatives. This study presents the first empirical test of the effectiveness of such subsidies using a database of competitors in 45 technological races. The results indicate that subsidies that require cooperation in the form of result-sharing agreements significantly increase the likelihood of cooperation, but they decrease incentives to conduct R&D. Subsidy programmes, such as EUREKA, that require cooperation but do not require result-sharing agreements do not increase the likelihood of cooperation. They do, however, increase incentives to conduct R&D somewhat, about to the same extent as subsidies that do not require cooperation.

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Basic Research and International Spillovers

Funk M.

This paper discriminates between basic and developmental research when estimating international research spillovers between nine OECD nations. Using panel cointegration techniques, the estimates show that basic research generates much larger international spillovers than developmental research. Developmental research in turn appears more easily appropriated by the research performer, and thus has a stronger effect domestically. These results suggest growth models should incorporate the firm’s choice between basic and developmental research. More importantly, since basic research receives a large proportion of its funding from public sources, the finding of large international spillovers from basic research suggests current public research policies should be reevaluated. The results support the argument in favor of increased international coordination of basic research policies.

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Do Public Subsidies Stimulate Private R&D Spending?

Gonzalez X., Pazo C.

The objective of this paper is to contribute to the empirical literature that evaluates the effects of public R&D support on private R&D investment. We apply a matching approach to analyze the effects of public R&D support in Spanish manufacturing firms. We examine whether or not the effects are different depending on the size of the firm and the technological level of the sectors in which the firms operate. We evaluate the effect of R&D subsidies on the subsidized firms, considering both the effect of subsidies on firms that would have performed R&D in the absence of public support and also the effect of inducement to undertake R&D activities. We also analyze the effect that concession of subsidies might have on firms which do not enjoy this type of support. The main conclusions indicate absence of “crowding-out”, either full or partial, between public and private spending and that some firms – mainly small and operating in low technology sectors – might not have engaged in R&D activities in the absence of subsidies.

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Investment Subsidies and Wages in Capital Goods Industries: To the Workers Go the Spoils?

Goolsbee A.

This paper looks at the impact of investment tax subsidies on the labor market for capital goods workers. Using data during a decade with considerable variation in the tax cost of capital (1979-1988), the results show that tax subsidies to investment drive up capital goods workers’ wages. A 10 percent investment tax credit, for example, raises the relative wages of such workers, on average, by 2.5 percent Р3.0 percent relative to comparable manufacturing workers in other sectors and more for certain types of workers. Rising wages make up an important part of the rising supply curve for capital goods and reflects imperfect short-run mobility of production workers across sectors.

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R&D Capital, Rate of Return on R&D Investment and Spillover ofR&D in Japanese Manufacturing Industries

Goto A., Suzuki K.

The effect of R & D on productivity growth in Japanese manufacturing industries is examined. Using more accurate firm R & D expenditure data than widely used data based on financial statements, series of R & D capital were constructed. Then, rate of return on R & D investment was estimated. In addition, the impact of other industries; R & D on the productivity growth of an industry was also estimated. An attempt was made to determine the effect of electronics technology upon the productivity growth of other industries through the transaction of the intermediate electronics goods with improved quality, and through the diffusion of the new technological knowledge discovered.

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Measuring the Cost-Effectiveness of an R&D Tax Credit for the UK

Griffith R., Redding S., Van Reenen J

This paper investigates the economic impact of the government’s proposed new UK R&D tax credit. We measure the benefit of the credit by the effect on value added in the short and long runs. This is simulated from existing econometric estimates of the tax-price elasticity of research and development (R&D) and the effect of R&D on productivity. For the latter, we allow R&D to have an effect on technology transfer (catching up with the technological frontier) as well as innovation (pushing the frontier forward). We then compare the increase in value added to the likely exchequer costs of the programme under a number of scenarios. In the long run, the increase in GDP far outweighs the costs of the tax credit. The short-run effect is far smaller, with value added only exceeding cost if R&D grows at or below the rate of inflation.

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Interindustry Technology Flows and Productivity Growth: A Reexamination

Griliches Z., Lichtenberg F.

The relationship between productivity growth and R & D intensity is reexamined using detailed data for 193 U.S. manufacturing industries and a breakdown of R & D into own product and process improvement oriented components and “imported” R & D from other industries. A significant interindustry relationship between total factor productivity growth and R & D intensity is reconfirmed

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The Impact of Public R&D Expenditure on Business R&D

Guellec D., Van Pottelsberghe B.

This paper attempts to quantify the aggregate net effect of government funding on business R&D in 17 OECD Member countries over the past two decades. Grants, procurement, tax incentives and direct performance of research (in public laboratories or universities) are the major policy tools in the field. The major results of the study are the following: Direct government funding of R&D performed by firms has a positive effect on business financed R&D (except if the funding is targeted towards defence activities). Tax incentives have an immediate and positive effect on business-financed R&D; Direct funding as well as tax incentives are more effective when they are stable over time: firms do not invest in additional R&D if they are uncertain of the durability of the government support; Direct government funding and R&D tax incentives are substitutes: increased intensity of one reduces the effect of the other on business R&D; The stimulating effect of government funding varies with respect to its generosity: it increases up to a certain threshold (about 10% of business R&D) and then decreases beyond; Defence research performed in public laboratories and universities crowds out private R&D; Civilian public research is neutral for business R&D. * We thank the participants to various seminars, including the OECD Committee for Scientific and Technology Policy and the NBER 2000 Summer Institute on Productivity for helpful comments and suggestions. All opinions expressed in this article are those of the authors and do not reflect necessarily the views of the OECD or Universite Libre de Bruxelles.

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From R&D to Productivity Growth: Do the Institutional Settings and the Source of Funds of R&D Matter?

Guellec D., Van Pottelsberghe B.

This paper presents estimates of the long-term impact of various sources of knowledge (R&D performed by the business sector, the public sector and foreign firms) on multifactor productivity growth of 16 countries from 1980 to 1998. The main results show that the three sources of knowledge are significant determinants of long-term productivity growth. Further evidence suggests that several factors determine the extent to which each source of knowledge contributes to productivity growth. These factors are the absorptive capability, the origin of funding, the socioeconomic objectives of government support, and the type of public institutions that perform R&D.

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L’Effet des Depenses en R&D sur la Productivite de Travail au Quebec

Hanel P.

The R&D-Productivity relationship in Quebec’s manufacturing industries is examined in a framework of growth accounting pioneered by Grilliches, Scherer and Terleckyj. The indirect effects on productivity of R&D executed by upstream suppliers are calculated for 1971-1982 period. The labour productivity growth rates are closely correlated with the growth rate of direct and indirect R&D expenses and with the growth rate of capital¬†‚Äî labour substitution. The results suggest that the indirect R&D has a more important and statistically more significant effect on productivity growth than the direct R&D. Federal subsidies to R&D seem to have a negative rather than positive effect on productivity growth.

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R&D, Inter-industry and International Technology Spillovers and the Total Factor Productivity Growth of Manufacturing Industries in Canada 1974-1989

Hanel P.

The paper presents new econometric evidence on the relationship between total factor productivity growth and the R&D expenditures of Canadian manufacturing industries in the presence of interindustry and international spillovers of technology. In contrast to studies that presume that international spillovers are incorporated in imports of intermediate and/or capital equipment goods, the present paper assumes that the principal channel of transmission of new technology is foreign direct investment. Three original proxies for international spillovers use information on patenting, the size and the origin of foreign ownership in the host country and the R&D expenditures in the country of origin. The results suggest that the nexus between industry’s own R&D expenditures and the TFP growth is significant and positive, especially for the process-related R&D. Domestic interindustry spillovers of new technology have a larger effect on TFP than industry’s own R&D expenditures. All three proxies for international technology spillovers are associated positively and significantly with TFP growth. However, international spillovers contribute to TFP growth less than domestic interindustry spillovers and less than own process-related R&D.

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R&D and Productivity in German Manufacturing Firms

Harhoff D.

This paper uses a new firm panel data set to explore the relationship between R&D and productivity in German manufacturing firms for the period from 1979 to 1989. The results confirm the view that K&D is an important determinant of productivity growth. In the cross-section, the elasticity of sales with respect to R&D capital is on the order of 14 per cent. Using fixed-effects estimators yields R&D elasticities of about 8 per cent. Assuming different depreciation rates for R&D capital has virtually no effect on these results. Differencing estimates improve considerably when growth rates are computed over longer time periods, suggesting that the divergence between time-series and cross-sectional estimates is driven by random measurement errors. The paper also considers differences between high technology and other firms. Cross-section and panel elasticity estimates of the R&D effect diverge considerably for the two groups, while the corresponding rate of return estimators display far less variation. There is some evidence that the R&D elasticity increased during the early 1980s, and that it fell sharply back to its 1979 value during the period from 1985 to 1989.

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Inward Investment and Technical Progress in the UK Manufacturing Sector

Hubert F., Pain N.

This paper investigates the impact of direct investment by foreign-owned companies on technical progress and hence labour productivity in the UK manufacturing sector. Using an industry-level panel data set we find that foreign-owned firms have a significant positive effect on the level of technical efficiency in domestic firms. There is evidence of significant intra-industry and inter-industry spillovers from inward investment. These findings remain robust even when other factors such as imports and domestic R&D expenditures are allowed for. Inward investment appears to be a much more important source of technical progress than foreign trade.

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Evaluating the Impacts of Subsidies on Innovation Activities in Germany

Hujer R., Radi¬e’ D

Innovations are a key factor to ensure the competitiveness of establishments as well as to enhance the growth and wealth of nations. But more than any other economic activity, decisions about innovations are plagued by failures of the market mechanism. As a response, public instruments have been implemented to stimulate private innovation activities. The effectiveness of these measures, however, is ambiguous and calls for an empirical evaluation. In this paper we make use of the IAB Establishment Panel and apply various microeconometric methods to estimate the effect of public measures on innovation activities of German establishments. We find that neglecting sample selection due to observable as well as to unobservable characteristics leads to an overestimation of the treatment effect and that there are considerable differences with regard to size class and between West and East German establishments.

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Demand and Supply Influences in R&D Intensity and Productivity Growth

Jaffe A.B.

The effects of technological opportunity, market demand and R&D spillovers on R&D intensity and productivity growth are quantified. It is shown that all three factors have significant effects on R&D demand; with respect to productivity growth, it is not possible to distinguish demand and technological opportunity effects, but spillovers are important.

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Reinventing Public R&D: Patent Policy and the Commercialization of National Laboratory Technologies

Jaffe A.B., Lerner J.

Despite their magnitude and potential impact, federal R&D expenditures outside of research universities have attracted little economic scrutiny. We examine the initiatives since 1980 to encourage patenting and technology transfer at the national laboratories. Both field and empirical research challenges the conventional picture of bleak failure. The policy changes had a substantial impact on the laboratories’ patenting: they have gradually reached parity in patents per R&D dollar with research universities. Unlike universities, laboratory patent quality has remained constant or even increased despite this growth. Success is associated with avoiding technological diversification and with having a university as lab manager.

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A Cross-National Comparison of R&D Expenditure Decisions: Tax Incentives and Financial Constraints

Klassen K.J.,Pittman J.A., Margaret P.

We provide evidence on the impact of tax incentives and financial constraints on corporate R&D expenditure decisions. We contribute to extant research by comparing R&D expenditures in the United States and Canada, thereby exploiting the differences in the two countries’ R&D tax credit mechanisms and generally accepted accounting principles. The two tax incentive mechanism designs are consistent with differing views of the degree of financial constraints faced by firms in these economies. Our sample also allows us to explore the effects of capitalizing R&D on Canadian firms. Employing a matched design, we document relations between tax credit incentives and R&D spending consistent with both Canadian and U.S. public companies responding as though they are not financially constrained. We estimate that the Canadian credit system induces, on average, $1.30 of additional R&D spending per dollar of taxes forgone while the U.S. system induces, on average, $2.96 of additional spending. We also find that firms that capitalize R&D costs in Canada spend, on average, 18 percent more on R&D. Collectively, this evidence is important to the ongoing debates in both countries concerning the appropriate design of incentives for R&D and is consistent with the assumptions found in the U.S. tax credit system, but not those found in the Canadian system.

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R&D, Scope Economies and Plant Performance

Klette T.J.

This article presents an alternative specification of knowledge production and derives a structural econometric model with some desirable properties. I provide a simple and less data-intensive framework for empirical studies of the relationship between firm performance and R&D. The main empirical finding are as follows: (i) R&D has a positive effect on performance, (ii) the appropriable part of knowledge capital depreciates at a rate of .2, (iii) there are significant spillover effects of R&D across lines of business within a firm, and (iv) there are significant spillovers in R&D across firms that belong to the same interlocking group of firms.

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Do Subsidies to Commercial R&D Reduce Market Failures? Microeconometric Evaluation Studies

Klette T.J., Moen J., Griliches Z.

A number of market failures have been associated with R&D investments and significant amounts of public money have been spent on programs to stimulate innovative activities. In this paper, we review some recent microeconometric studies evaluating effects of government-sponsored commercial R&D. We pay particular attention to the conceptual problems involved. Neither the firms receiving support, nor those not applying, constitute random samples. Furthermore, those not receiving support may be affected by the programs due to spillover effects which often are the main justification for R&D subsidies. Constructing a valid control group under these circumstances is challenging, and we relate our discussion to recent advances in econometric methods for evaluation studies based on non-experimental data. We also discuss some analytical questions, beyond these estimation problems, that need to be addressed in order to assess whether R&D support schemes can be justified. For instance, what are the implications of firms’ R&D investments being complementary to each other, and to what extent are potential R&D spillovers internalized in the market?

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Accumulation of R&D Capital and Dynamic Firm Performance: A Not-so-Fixed Effect Model

Klette T.J.,Johansen F.

Considering the observed patterns of R&D investment, we argue that a model which allows for a positive feedback from already acquired knowledge to the productiveness of current research, fits the empirical evidence better than the standard model that treats knowledge accumulation symmetrically with the accumulation of physical capital. We present an econometric framework consistent with a positive feedback in the accumulation of R&D capital. The empirical model is econometrically simple and less data-demanding than the standard framework. Our estimates show a significant positive effect of R&D on performance and a positive feedback effect from the stock of knowledge capital. We calculate the depreciation rate and the rate of return to knowledge capital for our alternative framework, and compare our estimated rates of return to results obtained within the standard framework. /// L’examen des evolutions des depenses d’investissements en R&D des entreprises nous conduit a proposer un modele qui permet un effet en retour du stock de connaissance deja acquis sur la productivite du flux present de recherche. Ce modele parait mieux adapte aux donnees que le modele standard qui traite de l’accumulation du capital de connaissance a l’instar de celle du capital physique. Nous presentons une formulation econometrique avec un schema d’accumulation du capital de connaissance (additif en logarithmes) impliquant un tel effet retroactif positif; celle-ci a aussi l’avantage de la simplicite et d’etre moins exigeante en matiere de donnees sur la R&D que la specification habituelle. Nos estimations montrent un effet positif significatif de la R&D sur la productivite, ainsi qu’un effet de retroaction positif du capital de connaissance. Nous en deduisons un taux de depreciation et un taux de rentabilite du capital de connaissance que nons comparons aux estimations correspondantes obtenues avec la formulation habituelle.

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R&D Subsidy and Self-Financed R&D: The Case of Japanese High-Technology Start- Ups

Koga T.

This paper examines whether public R&D subsidies constitute a substitute or complement for private-financed R&D. The empirical analysis is based on a panel data of 223 Japanese high-technology start-ups. Our evidence is consistent with the complement hypothesis, i.e., that publicly-funded R&D does promote private R&D. The complement effects are stronger for more mature firms. This is because such firms, in the growth phase, might have greater demands for R&D funds.

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Patents and R&D: An Econometric Investigation Using Applications for German, European and US Patents by German Companies

Licht G., Zoz K.

Based on the data of the first wave of the Mannheim Innovation panel, this paper explores the link between R&D expenditures and patents. Our data allow a detailed analysis of the firm size distribution of R&D and patent applications at different patent offices. It is shown that the share of R&D performing firms is stictly increasing wih firm size. The share of firms applying for patents shows an even steeper increase with firm size. Moreover, large firms are more likely apply for patents in more than one country. The home patent office appears especially important for small firms. Using various count data models, the paper explores the relationship between R&D and patents at the firm level. We carefully test several distributional assumptions for count data models. A negative binomial hurdle model seems to be the most appropriate count data model for our data as the decision to patent inventions and the productivity of R&D are ruled by different mechanisms. Our estimates point towards significant returns to scale of R&D. Furthermore, the empirical results can be interpreted towards minor and insignificant spillover effects. Even after controlling for a variety of firm characteristics, firm size exhibits a large effect on the propensity to patent. /// Cette etude est basee sur des donnees de l’enquete sur l’innovation des entreprises de Manheim. Elle analyse la relation entre depenses de R&D et brevets. Elle nous indique que la part des entreprises qui investissent en R&D et la part des entreprises qui font des depots de brevets augmentent en fonction de la taille de l’entreprise. De plus, les grandes entreprises font des depots de brevets dans plusieurs pays. L’office national des brevets joue apparemment un role tres important pour les petites et moyennes entreprises. Des modeles “count data” sont utilises pour elaborer la relation entre R&D et brevets. Les estimations montrent des economies d’echelle importantes de la R&D. De plus, l’interpretation des resultats empiriques degage des effets de debordement peu importants et insignifiants.

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An Analysis of Policy Initiatives to Promote Strategic Research Partnerships

Link A.N., Paton D., Siegel D.S.

The paper presents new econometric evidence on the relationship between total factor productivity growth and the R&D expenditures of Canadian manufacturing industries in the presence of interindustry and international spillovers of technology. In contrast to studies that presume that international spillovers are incorporated in imports of intermediate and/or capital equipment goods, the present paper assumes that the principal channel of transmission of new technology is foreign direct investment. Three original proxies for international spillovers use information on patenting, the size and the origin of foreign ownership in the host country and the R&D expenditures in the country of origin. The results suggest that the nexus between industry’s own R&D expenditures and the TFP growth is significant and positive, especially for the process-related R&D. Domestic interindustry spillovers of new technology have a larger effect on TFP than industry’s own R&D expenditures. All three proxies for international technology spillovers are associated positively and significantly with TFP growth. However, international spillovers contribute to TFP growth less than domestic interindustry spillovers and less than own process-related R&D.

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An econometric analysis of trends in research joint venture activity

Link A.N., Paton D., Siegel D.S.

Edith Penrose noted that firms may need to rely on research joint ventures (RJVs) to acquire access to resources that can help them achieve and sustain a competitive advantage. We estimate an econometric model of the propensity of firms to disclose their intention to engage in RJVs, in order to explain the recent precipitous decline in RJVs filed with the US Department of Justice. We find that RJV activity is inversely related to the competitive position of US firms in global high-technology industries and that the establishment of the US Commerce Department’s Advanced Technology Program (ATP) induced a structural change in the propensity of firms to engage in RJVs. Thus, two factors may explain the recent downturn in RJVs: a substantial improvement in US global performance in high-technology markets and a sharp decline in ATP funding. Copyright ≈í¬© 2005 John Wiley & Sons, Ltd.

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R&D spillovers and productivity: Evidence from U.S. manufacturing microdata

Los B., Verspagen B.

This paper deals with the estimation of the impact of technology spillovers on productivity at the firm level. Panel data for American manufacturing firms on sales, physical capital inputs, employment

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Are International R&D Spillovers Costly for the United States?

Luintel K.B., Khan M.

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Returns to American Agricultural Research: Results from a Cointegration Model

Makki S.S., Thraen C.S., Tweeten L.G.

This study examines the returns to U.S. agricultural research investments for the years 1930 through 1990 using a cointegration model. Time series data on agricultural productivity, public and private research investments, farmers’ education, terms of trade, and commodity programs were found to be nonstationary and cointegrated. The estimated internal rates of return are 27 percent for public research and 6 percent for private research. These estimates from the most comprehensive and timely data assembled to date indicate that returns to public agricultural research compare favorably to real returns on alternative long-run investments, but do not call for large increases in investments suggested by previous studies or for the drop in public research expenditures appropriated by the U.S. Congress in recent years.

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How Effective are Canada‚s Direct Tax Incentives for R and D?

Mansfield E., Switzer L.

Cette etude semble constituer une des premieres tentatives pour evaluer les effets des credits d’impots consentis par le Canada sur la recherche et le developpement commandites par les entreprises. Les resultats obtenus sont fondes sur un echantillon soigneusement choisi de firmes effectuant de la recherche et du developpement au Canada, sur une etude econometrique des donnees sur la recherche et le developpement industriels au Canada, et sur d’autres calculs impliquant l’elasticite aux prix de la demande pour la recherche et le developpement; ils revelent que les avantages fiscaux n’ont eu que peu d’effets. Les allocations speciales pour recherche et developpement semblent avoir fait augmenter les depenses de R & D d’environ 1 pour cent. et le credit d’impot a l’investissement semble les avoir fait augmenter d’environ 2 pour cent. Or, de telles augmentations sont equivalentes a environ 30 pour cent ou 40 pour cent du manque a gagner du gouvernement. /// This study seems to be one of the first attempts to estimate the effects of Canada’s R and D tax credits and allowances on company-funded research and development. The results (based on a carefully selected survey of firms carrying out R and D in Canada, an econometric study of Canadian industrial R and D data, and other calculations involving the price elasticity of demand for R and D) indicate that these effects have been modest. The special research allowance seems to have increased R and D expenditures by about 1 per cent, and the investment tax credit seems to have increased them by about 2 per cent. These increases amounted to about 30 or 40 per cent of the revenue losses to the government.

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The effects of R&D tax credits and allowances in Canada

Mansfield E., Switzer L.

In Canada, as in many other countries that have adopted R&D tax credits and allowances, there has been considerable controversy over their effectiveness in increasing company-financed research and development. This study seems to be one of the first systematic attempts to estimate the effects of Canada’s R&D tax credits and allowances. The results present a very consistent picture. The survey results, the econometric results, and some simple calculations based on rough measures of the price elasticity of demand for R&D all suggest that the special research allowance increased R&D expenditures by about 1 percent and that the investment tax credit increased them by about 2 percent. These increases seem to be appreciably less than the revenue losses to the government.

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Estimating the impact of the R&D tax credit on strategic groups in the pharmaceutical industry

McCutchen W.W.

The Economic Recovery and Tax Act of 1981 provided a 25 percent tax credit for increases in research and experimentation expenditures. Previous studies have shown considerable controversy about the effectiveness of various tax credits. This study focuses on the response of the strategic groups in the pharmaceutical industry to the credit. Four strategic groups were formed using different levels of research intensity (research/sales) and relative cash flow margin (cash flow/sales). The change in research intensity following enactment of the tax credit was estimated. The analysis found that the tax credit caused an increase in R&D expenditures. In addition, the R&D tax credit appears to have contributed to increased competitive R&D spending among the firms in the pharmaceutical industry.

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Tax Subsidies for R&D in Canadian Provinces

McKenzie K.J.

Cet article expose la variabilite du taux effectif de l’impot pour la Recherche et le Developpement (R&D) dans les dix provinces canadiennes. Nous montrons que, bien que toutes les provinces beneficient d’une subvention fiscale assez substantielle, pour R&D, la variation d’une province a l’autre est considerable, allant d’un taux de subvention effectif d’environ 40% en Alberta a un taux superieur a 200% au Quebec. /// This paper documents the variation in effective tax rates for R&D in Canada’s ten provinces. It is shown that while a sizable tax subsidy for R&D exists in every province, the variation across provinces is significant, ranging from an effective subsidy rate of about 40 percent in Alberta to over 200 percent in Quebec.

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Assessing the returns to collaborative research: Firm-level evidence from Italy

Medda G., Piga C., Siegel D.S.

We use firm-level data from Italian manufacturing firms to assess the relationship between various types of R&D and total factor productivity growth, including collaborative research with other firms and universities. A novel twist to our empirical analysis is that we estimate a sample selection model, which allows us to treat the decision to conduct R&D as endogenous. We find strong evidence of positive returns to collaborative research with other companies, whereas collaborative research with universities does not appear to enhance productivity. This result implies that firms may conduct R&D with universities when appropriability conditions are weak and the outcomes of such research projects do not yield direct strategic benefits.

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R&D, R&D spillovers and payments for technology: Canadian evidence

Mohnen P., LŽpine N

This paper pursues two objectives. The first one is to examine the interplay between R&D and foreign technology payments as two sources of technological knowledge on Canadian data. The second is to reexamine the issue of R&D spillovers in Canada by using patents as carriers of interindustry R&D externalities. The analysis is framed in a temporary equilibrium model, where the technology is represented by a translog variable cost function. The R&D stock of knowledge and the physical capital stock are considered as fixed inputs. Payments for technology are treated as a variable input, just as labor and intermediate inputs. The R&D spillover operates as a shift variable. The latter is constructed using a Canadian patent-based technology-flow matrix. The model is estimated on the panel data of 12 R&D-intensive Canadian manufacturing industries for the years 1975,1977, 1979, 1981, 1982 and 1983. The main findings of this paper are: (i) the complementarity of R&D and payments for technology; and (ii) the substantial inter-industry variability of R&D spillovers, an average excess of private over social rate of return on R&D of 50%, and the detection of key R&D externalities emitting sectors.

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Assessing spillovers from universities to firms: evidence from French firm-level data

Monjon S., Waelbroeck P.

We assess the importance of information flows from universities to innovative firms and determine the relative contribution of formal collaboration and pure knowledge spillovers in this process. We find that spillovers provide the most benefit to firms that imitate existing technologies or those that are involved in incremental innovation. On the other hand, highly innovative firms appear to derive most benefit from collaborative research with foreign universities. Indeed, highly innovative firms are at the frontier of the academic knowledge in their industry. Therefore, they only marginally benefit from aggregate (or industry-wide) spillovers. They require new forms of academic knowledge that they acquire through formal cooperation with foreign universities.

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Measuring Total Factor Productivity, Technical Change and the Rate of Returns to Research and Development

Nguyen S.V., Kokkelenberg E.C.

This paper examines the relationship between research and development expenditures and total factor productivity using establishment level (or micro) data. The confidential data are taken from the U.S. Bureau of the Census Annual Survey of Manufacturers and other Census surveys. Several measures of total factor productivity are considered as are several variables that proxy for technical knowledge. The latter include research and development expenditures by the firm, the accumulated research expenditures of the industry, and new equipment purchases. We find that there is a statistically significant relationship among above measures of technical expertise and a broad measure of total factor productivity.

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Research Activity, Output Growth, and Productivity Increase in Japanese Manufacturing Industries

Odagiri H.

The contribution of R & D expenditures to the productivity increase in Japanese manufacturing industries is investigated. With a popular single-equation approach, this contribution was found to be not only significant in all of the three periods, (1960-1966, 1966-1973 and 1973-1977), but also to exceed that estimated for the United States. However, when a simulataneous-equations approach was used to allow for an interaction between the learning effect (output growth enhancing productivity increase through the accumulation of experience) and the price effect (productivity increase stimulating output growth through a declining price), the results suggested not only the importance of these two effects but also the over-evaluation of the contribution of R & D in the usual ordinary least-squares estimation.

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Private and quasi-social rates of return on pharmaceutical R&D in Japan

Odagiri H., Murakami N.

This paper calculates the rates of return (ROR) on R&D in the pharmaceutical industry in Japan by estimating the R&D function and the return function, where the former refers to the link between R&D expenditures and new drug development and the latter to the link between new drug development and profits. Since the ROR estimated with industry data must include the effect of technological spillover to other firms and the contribution to industrial profits through generic production, it is interpreted as quasi-social ROR (quasi because consumers’ surplus is not taken into account), while the ROR estimated with company data does not include these effects and are interpreted as the private ROR. Our finding clearly indicates that the quasi-social ROR (about 33 percent) exceeds the private ROR (about 19 percent) suggesting the presence of both spillover and generic effects.

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Is Private R&D Spending Sensitive to its Price? Empirical Evidence on Panel Data for Italy

Parisi M.L., Sembellini A.

In this paper empirical evidence is presented on theelasticity of private R & D spending on its price. Acensored panel-data regression model with random effectsis applied to a balanced panel of 726 Italian firms overthe 1992‚Äì1997 period. Implied estimates point out thatItalian firms’ response to policy measures (including taxcredits), aimed at reducing the user cost of R & D capital,is likely to be substantial (1.50‚Äì1.77). Furthermore, wealso find that the elasticity of R & D spending is higherin recession (2.01) than in expansion (0.87).

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International and Intersectoral R&D Spillovers in the OECD and East Asian Economies

Park J.

This study empirically explores international and intersectoral R&D spillover effects on the total factor productivity growth of manufacturing and nonmanufacturing sectors based on a pooled time-series data set of 14 OECD economies and 3 East Asian economiesäóiKorea, Singapore, and Taiwan. The study finds that foreign manufacturing R&D has strong influence on domestic productivity growths of both sectors and that domestic manufacturing R&D has a substantial intersectoral R&D spillover effect on domestic nonmanufacturing productivity growth. The social rates of return to manufacturing R&D are estimated to be two to six times greater than the private rates of return.

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International R&D Spillovers and OECD Economic Growth

Park W.G.

This paper quantifies the cross-national spillover effects of government and private investment in research and development (ROD), using a panel data set of ten OECD countries. The results show that domestic private research is a significant determinant of both domestic and foreign productivity growth, and that foreign government research stimulates domestic private research. These findings are significant in that they provide empirical support for arguments in favor of international economic policy coordination, particularly in the area of international science and technology.

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Defence Innovation Stock and Total Factor Productivity

Poole E., Bernard J.T.

This study explores the impact of defence industrial production on the productivity of four Canadian three-digit SIC industries. A Tornqvist index of the annual change of total factor productivity is calculated. A defence production `innovation stock’ is constructed from new data on defence industrial production in Canada between 1961 and 1985. SURE multiple regression analysis shows that military production has a negative impact on total factor productivity for the four industries. /// Stock d’innovation de defense et productivite totale des facteurs de production. Dans cette etude, nous mesurons l’impact de la production militaire sur la productivite de quatre industries canadiennes a trois chiffres CTI. L’indice Tornqvist du changement annuel de la productivite totale des facteurs de production est calcule et un `stock d’innovation’ militaire est construit, a partir de donnees inedites de la production militaire au Canada, pour la periode de 1961 a 1985. Une analyse de regression multiple de type SURE en differences premieres proportionnelles demontre un impact negatif de la production militaire sur la productivite totale des facteurs pour les quatre industries.

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Evaluating the Impact of Public Support on Commercial Research and Development Projects: Are Verbal Reports of Additionality Reliable?

Rye M.

Additionality is a recurring issue when evaluating the impact of public support for research and development (R&D). To what degree does public support spur additional R&D efforts and output? This article discusses the additionality concept and its measurement. Verbal reports from recipients of public support are a widely used method for measuring the additionality of ongoing R&D programmes. However, it is often argued that these reports cannot be trusted since the recipients might have an incentive to answer strategically to maintain funding. Based on the verbal reports of project additionality in Norwegian evaluations over the last two decades, involving 2624 observations, higher additionality is reported in projects further from the market involving higher risks and uncertainty than in projects closer to market launch. This is in line with a priori expectations. It will be argued that the problem of strategic answering might be over-rated, and that verbal reports can provide important evidence. This is exemplified by results from verbal reports of additionality obtained by interviewing the customers of 21 different Norwegian research institutes.1 They show that public support is more important for the realization of projects within small- and medium-sized enterprises than with larger firms.

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The Impact of Procurement-Driven Technological Change on U.S. Manufacturing Productivity Growth

Saal D.S.

As we enter the 21st Century, technologies originally developed for defense purposes such as computers and satellite communications appear to have become a driving force behind economic growth in the United States. Paradoxically, almost all previous econometric models suggest that the largely defense‐oriented federal industrial R&D funding that helped create these technologies had no discernible effect on U.S. industrial productivity growth. This paper addresses this paradox by stressing that defense procurement as well as federal R&D expenditures were targeted to a few narrowly defined manufacturing sub‐sectors that produced high tech weaponry. Analysis employing data from the NBER Manufacturing Productivity Database and the BEA’ s Input Output tables then demonstrates that defense procurement policies did have significant effects on the productivity performance of disaggregated manufacturing industries because of a process of procurement‐driven technological change.

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Impact of R&D and Technology Diffusion on Productivity Growth: Empirical Evidence for 10 OECD Countries

Sakurai N., Papaconstantinou G.,Ioannidis E.

This paper examines the empirical evidence on the impact of performed R&D and of R&D embodied in intermediate and capital goods on productivity performance in 10 major OECD countries over the last two decades. To quantify intersectoral and international technology flows, industry-level embodied R&D variables were constructed from an input-output (IO) R&D embodiment model. The productivity variables used are discrete Divisia growth indexes of total factor productivity (TFP), which were estimated from an IO growth accounting model. The results from pooled regressions indicate that the rates of return of the R&D variables were positively significant and increasing in the 1980s. In particular, embodied R&D is an important source for TFP growth in services, indicating very high social returns of the flows of capital-embodied technology into this sector. Moreover, the information and communi-cation technology (ICT) cluster of industries played a major role in the generation and cquisition of new technologies at the international level.

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The economic benefits of publicly funded basic research: a critical review

Salter A.J., Martin B.R.

This article critically reviews the literature on the economic benefits of publicly funded basic research. In that literature, three main methodological approaches have been adopted √§√≥i econometric studies, surveys and case studies. Econometric studies are subject to certain methodological limitations but they suggest that the economic benefits are very substantial. These studies have also highlighted the importance of spillovers and the existence of localisation effects in research. From the literature based on surveys and on case studies, it is clear that the benefits from public investment in basic research can take a variety of forms. We classify these into six main categories, reviewing the evidence on the nature and extent of each type. The relative importance of these different forms of benefit apparently varies with scientific field, technology and industrial sector. Consequently, no simple model of the economic benefits from basic research is possible. We reconsider the rationale for government funding of basic research, arguing that the traditional √§√≥Omarket failure’ justification needs to be extended to take account of these different forms of benefit from basic research. The article concludes by identifying some of the policy implications that follow from this review.

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Journal of Political Economy

Scanners’ T

The main goal of this paper is to put forward a methodology for the measurement of product innovations using a value metric, that is, equating the “magnitude” of innovations with the welfare gains they generate. This research design is applied to the case of computed tomography scanners, a revolutionary innovation in medical technology. The econometric procedure centers on the estimation of a discrete choice model (the nested multinominal logit), which yields the parameters of a utility function defined over the changing quality dimensions of the innovative product. The estimated flow of social gains from innovation is used to compute a social rate of return to R & D, to explore the interrelation between innovation and diffusion, and to trace the time profile of benefits and costs, the latter suggesting the possible occurrence of “technological cycles.”

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Assessing the impact of university science parks on research productivity: exploratory firm-level evidence from the United Kingdom

Siegel D.S., Westhead P., Wright M.

University science parks are alleged to stimulate technological spillovers. However, there is virtually no empirical evidence on the impact of these facilities on research productivity. We begin to fill this gap by examining whether companies located on university science parks in the United Kingdom have higher research productivity than observationally equivalent firms not located on a university science park. The preliminary results appear to be consistent with this hypothesis and are robust to the use of alternative econometric procedures to assess relative productivity.

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R&D, Public Innovation Policy, And Productivity: The Case Of Danish Manufacturing

Sorensen A., Kongsted H.C., Marcusson, M.

The purpose of this paper is to investigate the relationship between private R&D, public innovation support transferred to the private sector, and productivity in Danish manufacturing. Two main conclusions are established. First, public innovation support has a positive and significant effect on private R&D expenditures with an estimated elasticity of 0.062. Second, the indirect effect on productivity from public innovation support is reflected in a positive point estimate which is found to be robust to different specifications of R&D capital.

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How Relevant is University-Based Scientific Research to Private High Technology Firms? A U.S.-Japan Comparison

Spencer J.W.

This cross-national study explores the relative contributions of academic and corporate research to subsequent industrial R&D activities within one industry. Japanese university research emerged as less influential than Japanese corporate research. The difference between the relevance of U.S. university and U.S. corporate research was only marginally significant. In both countries, university research appeared to contribute most to domestic firms. These findings accentuate the role that national institutional structures play in influencing a country’s university research activity.

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R&D spillovers and technology transfer among and within vertical keiretsu groups: Evidence from the Japanese electrical machinery industry

Suzuki K.

Abstract Using a dynamic factor demand model with R&D externalities, we analyze the effects of technological diffusion among and within vertical keiretsu groups in the Japanese electrical machinery industry. We find that technology transfer from a core firm to its …

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Some tests of the incentive effects of the research and experimentation tax credit

Swenson C.W.

The effectiveness of the tax credit for research and experimentation (R&E) expenditures is examined using a panel of firm data for the period 1975 through 1988. Using a structural model, the results generally indicate that the credit resulted in increased R&E spending. However, the effect of the credit was substantially mitigated by the impacts of net operating loss carryovers and low growth opportunities. Results also indicate some degree of decreased R&E spending as a result of debt restructuring activity. Tax policy implications are discussed.

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Knowledge Spillovers and High-technology Clustering: Evidence from Taiwan’s Hsinchu Science-Based Industrial Park

Tsai D.H.

Knowledge spillovers of high-technology industries are alleged to be important determinants of industrial clustering. Dynamic production modeling is applied to measure the sectoral and spatial spillover effects to study the implications of various types of knowledge spillovers on high-technology industry clustering in Taiwan’s Hsinchu Science-based Industrial Park (HSIP). The analysis is performed using the Taiwanese government’s industrial census of technological activities at the micro level with 2340 plants for the period 1986-1995. We find substantive sectoral and spatial knowledge spillover effects, which are considered to be major motivating forces for regional concentration patterns of Taiwan’s high-technology industries. (JEL L10, O30)

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International R&D Spillovers: A Comment

Van Pottelsberghe B., Lichtenberg, F.R.

Previous studies have found that importing goods from R&D-intensive countries raises a country’s productivity. In this paper, we investigate econometrically whether foreign direct investment (FDI) also transfers technology across borders. The data indicates that FDI transfers technology, but only in one direction: a country’s productivity is increased if it invests in R&D-intensive foreign countries‚Äîparticularly in recent years‚Äîbut not if foreign R&D-intensive countries invest in it. Other findings of the paper are that the ratio of foreign-R&D benefits conveyed by outward FDI to foreign R&D benefits conveyed by imports is higher for large countries than it is for small ones, that failure to account for international R&D spillovers leads to upwardly biased estimates of the output elasticity of the domestic R&D capital stock, and that there are much larger transfers of technology from the United States to Japan than there are from Japan to the United States.

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Spillover effects, linkage structure, and research and development

Wolff E.N., Ishaq Nadiri M

We use US input-output data for the 1947-1977 period to analyse the relations among research and development (R&D), technical change, and intersectoral linkages. Our most novel finding is that among manufacturing industries, an industry’s rate of technological progress is positively and significantly related to that of its supplying sectors. Another new finding is that among all sectors of the economy, a sector’s R&D intensity and rate of technological progress positively affect its degree of linkage with other sectors. We also find significant spillovers from R&D embodied in new investment.

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Capital Goods Trade and R&D Spillovers in the OECD

Xu B., Wang J.

In this paper the significance of capital goods trade as conduit for R&D spillovers is investigated and the impact of international R&D spillovers on OECD countries is quantitatively assessed. Capital goods trade is tested against non-capital goods trade, and knowledge embodied in trade flows is evaluated vis-a-vis R&D spillovers in disembodied form. Our estimation indicates that about half of the return on R&D investment in a G7 country spilled over to other OECD countries. Trade in capital goods was found to be a significant channel of R&D spillovers, although the majority of the R&D spillovers in the OECD were transmitted through other channels. JEL Classification: O40, F10 /// Le commerce des biens capitaux et les effets de retombee des depenses de R&D dans les pays de l’OCDE. Ce memoire examine l’importance du commerce des biens capitaux en tant que conduit pour les effets de retombee des depenses de R&D et mesure l’impact des effets externes internationaux du R&D dans les pays de l’OCDE. On compare l’effet du commerce de biens capitaux avec celui du commerce de biens non-capitaux, et on compare les effets de la connaissance incorporee dans les flux de commerce par rapport aux effets externes quand les effets de retombee ne sont pas incorpores. Il semble que la moitie des rendements sur les investissements en R&D viennent des autres pays de l’OCDE. Il appert que le commerce de biens capitaux est un canal important des effets externes du R&D, meme si le gros des effets externes de l’investissement en R&D est transmis par d’autres canaux.

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A computational analysis of R&D support programs.

Garza, D., Giat, Y., Hackman, S. T., & Peled, D.

This paper compares two common government R&D support programs, R&D tax credits and direct R&D grants. To study their effectiveness and the extent to which their design matters, we analyze these programs within a dynamic equilibrium model of imperfectly competitive industries. Adopting comprehensive welfare measures that take into account government, producer and consumer surpluses, we find that both schemes exhibit positive social returns. Mid-range R&D-intensive sectors exhibit higher social returns than either high or low R&D-intensive sectors. Both incentive schemes generate positive measures of R&D input additionality of magnitudes consistent with empirical R&D research. However, R&D grants that require firms to allocate subsidy funds to R&D spur less R&D than a more flexible R&D tax credit. Subsidy schemes can even induce competing firms to over-spend on R&D, generating negative producer surplus and possibly negative social returns.

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Economic efficiency of federal provision of scientific information and support for science research in Canada

Davies, J. B., & Slivinski, A.

We compare two common government R&D support programs, R&D tax credits and direct R&D grants. To study their effectiveness and the extent to which their design matters, we analyze these programs within a dynamic equilibrium model of imperfectly competitive industries. Adopting comprehensive welfare measures that take into account government, producer and consumer surpluses, we find that both schemes exhibit positive social returns. Mid-range R&D-intensive sectors exhibit higher social returns than either high or low R&D-intensive sectors. Both incentive schemes generate positive measures of R&D input additionality of magnitudes consistent with empirical R&D research. However, R&D grants that require firms to allocate subsidy funds to R&D spur less R&D than a more flexible R&D tax credit. Subsidy schemes can even induce competing firms to over-spend on R&D, generating negative producer surplus and possibly negative social returns.

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Benefit-cost analysis of R&D support programs

Lester, J.

Federal provision of scientific information and support for science research have declined significantly in recent years, and a trend away from pure research toward applied and commercializable research has begun. This commentary asks whether those and other trends in this area can be justified in terms of economic efficiency. It is argued that the marginal benefits of scientific information and research have likely risen relative to production costs and the marginal cost of public funds has fallen, implying that reduced provision cannot be justified on efficiency grounds. An efficiency rationale for increased support for commercializable research is also lacking. Longer-term trends include the rise of open data, which does make sense, and a relative shift from intramural government research and development toward university-based R&D. The latter shift likely responds to underlying economic factors, but does not warrant a sudden sharp reduction in government research, such as seen recently in Canada.

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R&D subsidies and the performance of high-tech start-ups

Colombo, M. G., Grilli, L., & Murtinu, S.

The benefit-cost approach used in this article calculates the impact of R&D subsidies on real income taking into consideration the benefit created by knowledge spillovers from the induced R&D, the cost of financing the subsidies with taxes that unavoidably harm economic performance, the cost of shifting resources from their market-determined uses, and administration and compliance costs. The SR & ED credit hasoSR&EDD components: a regular 20 percent credit and an enhanced 35 percent refundable credit for smaller Canadian-controlled firms. The regular credit generates a net economic benefit, but the enhanced credit fails a benefit-cost test, owing to higher compliance costs and a higher subsidy rate. IRAP also fails a benefit-cost test, despite the assumption that IRAP-funded R&D generates higher spillovers than R&D funded by the tax credit, owing to the high cost of administering and complying with the program.

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Evaluating the impact of R&D tax credits on innovation: A microeconometric study on Canadian firms

Czarnitzki, D., Hanel, P., & Rosa, J. M.

This paper addresses the question of the efficacy of R&D policy measures in support of high-tech start-ups. We show that subsidies awarded on a competitive basis lead to a positive effect, while those assigned through an automatic procedure do not.

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Effectiveness of R&D tax incentives in small and large enterprises in Quebec

Baghana, R., & Mohnen, P

This study examines the effect of R&D tax credits on innovation activities of Canadian manufacturing firms. Over the 1997–1999 period the Federal and Provincial R&D tax credit programs were used by more than one third of all manufacturing firms and by close to two thirds of firms in high-technology sectors. We investigate the average effect of R&D tax credits on a series of innovation indicators such as: number of new products, sales with new products, originality of innovation, etc. using a non-parametric matching approach. Compared to a hypothetical situation in the absence of R&D tax credits, recipients of tax credits show significantly better scores on most but not all performance indicators. We therefore conclude that tax credits lead to additional innovation output.

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Canadian science, technology and innovation policy: The product of regional networking?

Salazar, M., & Holbrook, A

This paper evaluates the effectiveness of R&D tax incentives in Quebec, using manufacturing firm data from 1997 to 2003 originating from R&D surveys, annual surveys of manufactures and administrative data. The estimated price elasticity of R&D is –0.10 in the short run and –0.14 in the long run, with slightly higher elasticities for small firms than for large firms. We show that there is a deadweight loss associated with level-based R&D tax incentives that is particularly acute for large firms. For small firms it is not sizeable enough to suppress the R&D additionality, at least not for quite a number of years after the initial tax change. Incremental R&D tax credits do not suffer from this deadweight loss and are from that perspective preferable to level-based tax incentives.

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Tax subsidies for R&D in Canadian Provinces

McKenzie, K. J.

The structure of federal countries poses challenges to science, technology and innovation (STI) policy-making and regional development not found in centrally governed nations. This paper tests the thesis that Canadian STI policy is highly regionalized in practice because of its networked structure, despite most of the funding coming from the federal government, which formulates most STI policies and programmes. Many of Canada’s STI programmes promote the creation of networks. These networks are part of the federal emphasis given to provincial/regional economic development and more recently to industrial cluster promotion.

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Benchmarks, yardsticks and new places to look for industrial innovation and growth

Lipsett, M. S., & Lipsey, R. G.

This paper documents the variation in effective tax rates for R&D in Canada’s ten provinces. It is shown that while a sizable tax subsidy for R&D exists in every province, the variation across provinces is significant, ranging from an effective subsidy rate of about 40 percent in Alberta to over 200 percent in Quebec.

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R&D Tax Incentive Comparisons: Canadian and US Large Manufacturing Industries

Iqbal, M.

This paper presents new figures and proposes new metrics for industrial innovation in Canada. Two sources of new information are cited: Canadian taxation statistics; and a demographics research database that is currently under development. Although the figures are local to Canada, the approach is likely to apply internationally.

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The Goals of R&D in the 1970s

Freeman, C., Oldham, C. H. G., Cooper, C. M., Sinclair, T. C., & Achilladelis, B. G.

The study analyzes the tax-related benefits of research and development (R 8 D) for the petrochemical, telecommunications, steel, and newsprint industries in selected Canadian and US jurisdictions using a cash flow model. The findings show that Canadian R & D performers generally receive greater tax benefits than their counterparts in the United States, although the overall corporate tax burden is marginally higher in Canada. Such benefits are especially pronounced for Quebec and Ontario owing to the provision of a wage tax credit in Quebec and a superallowance in Ontario.

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