Is Corporate R&D Investment in High-Tech Sectors More Effective? Some Guidelines for European Research Policy

25 Pages Posted: 25 Jan 2009

See all articles by Raquel Ortega-Argilés

Raquel Ortega-Argilés

University of Groningen - Faculty of Economics and Business; University of Groningen - RUG

Mariacristina Piva

Universita Cattolica del Sacro Cuore

Lesley Potters

European Union - European Commission; Utrecht University - School of Economics

Marco Vivarelli

Universita Cattolica del Sacro Cuore, Milano; IZA Institute of Labor Economics

Abstract

This paper discusses the link between R&D and productivity across the European industrial and service sectors. The empirical analysis is based on both the European sectoral OECD data and on a unique micro longitudinal database consisting of 532 top European R&D investors. The main conclusions are as follows. First, the R&D stock has a significant positive impact on labour productivity; this general result is largely consistent with previous literature in terms of the sign, the significance and the magnitude of the estimated coefficients. More interestingly, both at sectoral and firm levels the R&D coefficient increases monotonically (both in significance and magnitude) when we move from the low-tech to the medium and high-tech sectors. This outcome means that corporate R&D investment is more effective in the high-tech sectors and this may need to be taken into account when designing policy instruments (subsidies, fiscal incentives, etc.) in support of private R&D. However, R&D investment is not the sole source of productivity gains; technological change embodied in gross investment is of comparable importance on aggregate and is the main determinant of productivity increase in the low-tech sectors. Hence, an economic policy aiming to increase productivity in the low-tech sectors should support overall capital formation.

Keywords: R&D, productivity, high-tech sectors, innovation, industrial policy

JEL Classification: O33

Suggested Citation

Ortega-Argiles, Raquel and Piva, Mariacristina and Potters, Lesley and Vivarelli, Marco, Is Corporate R&D Investment in High-Tech Sectors More Effective? Some Guidelines for European Research Policy. IZA Discussion Paper No. 3945. Available at SSRN: https://ssrn.com/abstract=1332586

Raquel Ortega-Argiles (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

University of Groningen - RUG ( email )

P.O. Box 800
Groningen, 9700 AH
Netherlands

Mariacristina Piva

Universita Cattolica del Sacro Cuore ( email )

Via Emilia Parmense, 84
Piacenza
Italy

Lesley Potters

European Union - European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

Marco Vivarelli

Universita Cattolica del Sacro Cuore, Milano ( email )

Largo Gemelli 1
Milano, 20123
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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