Do Spillovers Matter When Estimating Private Returns to R&D?

41 Pages Posted: 29 Nov 2011

See all articles by Markus Eberhardt

Markus Eberhardt

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP)

Christian Helmers

Santa Clara University - Leavey School of Business; Universidad Carlos III de Madrid

Hubert Strauss

European Investment Bank

Date Written: November 29, 2011

Abstract

A large body of literature estimates private returns to R&D adopting the Griliches knowledge production framework which ignores the potential impact of spillovers on consistent estimation. Using a panel of 12 manufacturing industries across ten OECD economies, we investigate whether ignoring spillovers leads to bias in the estimated private returns to R&D. We compare results from a common factor framework, which accounts for spillovers and other unobserved shocks, to those from a standard Griliches approach. Our findings confirm that conventional estimates conflate own-R&D and spillover effects, implying that spillovers cannot be ignored even when the interest lies exclusively in evaluating private returns to R&D.

Keywords: Productivity, R&D, Spillovers, Common Factor Model

JEL Classification: D24, L16, C23

Suggested Citation

Eberhardt, Markus and Helmers, Christian and Strauss, Hubert, Do Spillovers Matter When Estimating Private Returns to R&D? (November 29, 2011). Available at SSRN: https://ssrn.com/abstract=1966020 or http://dx.doi.org/10.2139/ssrn.1966020

Markus Eberhardt (Contact Author)

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP) ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Christian Helmers

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Hubert Strauss

European Investment Bank ( email )

98-100, boulevard Konrad Adenauer
Luxembourg, L-2950
Luxembourg
+352437988673 (Phone)
+352437968895 (Fax)

HOME PAGE: http://www.eib.org/efs

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