On the Relationship between R&D and Productivity: A Treatment Effect Analysis

27 Pages Posted: 9 May 2003

Date Written: April 2003


This study uses firm level data from two detailed surveys of Italian manufacturing firms to study the relationship between R&D expenditures and productivity growth. The analysis considers the different contributions of various forms of R&D (product, process, internal, external in collaboration with universities, research centres and other firms) to Total Factor Productivity (TFP). Thus, this paper answers the call for more research on the links between a firm's external R&D and its productivity. In the cross-section econometric analysis, we estimate a Treatment Effects model based on the assumption that the decision to carry out R&D is endogenous. We found evidence supporting such a methodological approach.

The main results reveal a positive and statistically significant relationship between the detailed measures of R&D and TFP. It is noteworthy that among external R&D investments, only expenditures for projects run in collaboration with other firms turn out to be highly significant, while cooperation in R&D with universities does not seem to lead to productivity enhancements. Because of the public good nature of research, firms may resort to do R&D within laboratories run by universities only when the outcome of the research does not have important strategic consequences.

Keywords: Total Factor Productivity, Selectivity, Manufacturing, Firm Level

JEL Classification: C21, C80, D24, O30

Suggested Citation

Medda, Giuseppe and Piga, Claudio A. and Siegel, Donald S., On the Relationship between R&D and Productivity: A Treatment Effect Analysis (April 2003). Available at SSRN: https://ssrn.com/abstract=385440 or http://dx.doi.org/10.2139/ssrn.385440

Giuseppe Medda

University of Sassari ( email )

via Muroni 25
Sassari, Sassari 07100

Donald S. Siegel

Arizona State University ( email )

411 North Central
Phoenix, AZ 85004
United States
6024961101 (Phone)

No contact information is available for Claudio A. Piga

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics