Assessing the relationship between R&D subsidy,R&D cooperation and absorptive capacity: an investigation on the manufacturing Spanish case

Private companies want to eliminate outgoing spillovers while policymakers seek to maximize them. With subsidized R&D cooperation agreements both agents partially achieve their objectives. For this reason, in Europe, policymakers grant subsidies for R&D activities with the condition of establishing R&D cooperation agreements. This study explores the relationship of complementarity between R&D subsidy, R&D cooperation and absorptive capacity in the context of its contribution to labor productivity of enterprises. The data used comes from the Technological Innovation Panel (PITEC), managed by the Spanish National Statistics Institute. We selected manufacturing companies in the period 2008–2013. We evaluate the existence of complementarity through the systems approach and the interaction approach. The econometric technique that we used to estimate the coefficients of our empirical model was maximum-likelihood random effects. As a consequence of the low absorptive capacity of Spanish manufacturing firms we find that R&D subsidies and R&D cooperation agreements are not complementary variables, i.e., receiving public subsidies as a result of establishing R&D cooperation agreements has a lower impact on productivity than the sum of the individual impacts of R&D cooperation and R&D subsidies. In consequence, this result calls into question the convenience of using subsidized R&D cooperation agreements as a tool for promoting innovation in EU countries as there are notable differences between the companies in these countries in terms of absorption capacity.     

Underinvestment in Public Good Technologies

Although underinvestment phenomena are the rationale for government subsidization of research and development (R&D), the concept is poorly defined and its impact is seldom quantified. Conceptually, underinvestment in industrial R&D can take the form of either a wrong amount or a suboptimal composition of R&D investment. In both cases, R&D policy has not adequately modeled the relevant economic phenomena and thus is unable to characterize, explain, and measure the underinvestment. Four factors can cause systematic underinvestment in R&D-intensive industries: complexity, timing, existence of economies of scale and scope, and spillovers. The impacts of these factors vary in intensity over the typical technology life cycle, so government policy responses must be managed dynamically. In addition to understanding the causes of underinvestment in R&D, the magnitude of the deficiency relative to some “optimum” must be estimated to enable a ranking of technology areas with respect to expected net economic benefits from a government subsidy. Project selection criteria must therefore be based on quantitative and qualitative indicators that represent the nature and the magnitude of identified market failures. The major requirement for management of R&D policy therefore is a methodology that regularly assesses long-term expected benefits and risks from current and proposed R&D portfolios. To this end, a three-stage process is proposed to effectively carry out R&D policy analysis. The three stages are (1) identify and explain the causes of the underinvestment, (2) characterize and assess the investment trends and their impacts, and (3) estimate the magnitude of the underinvestment relative to a perceived optimum in terms of its cost to the economy. Only after all three stages of analysis have been completed can the underinvestment pattern be matched with the appropriate policy response.     

An Econometric Analysis of the Role of Knowledge in Economic Performance

We conduct a regression analysis of the effects of knowledge on aggregate economic performance using data from the United Nations Development Program (UNDP) and the World Bank for four groups of countries during 1995–2001. Our results indicate that knowledge is a key driver of economic growth for each group of countries. More importantly, we find that variation in economic performance among these groups may be related to the timing of investment in education, R&D, and information technology, as well as economic policies that affect trade and foreign direct investment.     

Geographic and technological R&;D spillovers within the triad: micro evidence from US patents

This paper aims at assessing the magnitude of R&D spillover effects on large international R&D companies’ productivity growth. In particular, we investigate the extent to which R&D spillover effects are intensified by both geographic and technological proximities between spillover generating and receiving firms. We also control for the firm’s ability to identify, assimilate and absorb the external knowledge stock. The results estimated by means of panel data econometric methods (system GMM) indicate a positive and significant impact of both types of R&D spillovers and of absorptive capacity on productivity performance.

The structure and dynamics of the global network of inter-firm R&D partnerships 1989–2002

Research and development (R&D) partnerships are formed to share the risks and benefits of R&D. At the macro level, they result in a globe-spanning network that can be a valuable source of international knowledge spillovers. This network is the subject of a considerable body of literature. Often-made claims are that R&D collaboration is an important activity in a competitive environment, but that the importance of international partnerships has declined over time. Furthermore, it is claimed that collaborations are disproportionally concentrated within the developed economies. However, this literature fails to account for variations in the sizes of underlying firm populations between countries and over time. We argue that these population sizes create an opportunity structure of available collaboration partners for firms, and that ignoring variations in this structure potentially leads to erroneous conclusions about the structure and dynamics of the R&D network. To address this problem, we study the structure and dynamics of the global R&D network on an international and cross-industry scale using longitudinal data for 1989?C2002. We integrate data on public firms and their R&D partnerships and confront earlier findings with our data and a set of methods, which enables us to correct for the structure and dynamics in the firm population. While our study confirms previous findings concerning the worldwide trend in collaborative activity, it also shows that results on individual countries need correction. In particular, the importance of R&D collaboration for US companies is overestimated, while their openness towards foreign partners is underestimated.     

Factors influencing technology transfer: The case of China

Transferring and utilizing technology in developing economies is a vital issue for economic growth. Often the separation between R&D institutes and industrial concerns limits the transfer of technology. The People's Republic of China, which has conducted R&D in institutes separate from the potential user firms, has recently moved to facilitate domestic technology transfer from R&D institutes to R&D consumers. This study, based on the statistical analysis of 60 R&D institutes in the machinery sector in China, found that, while R&D intensity improves transfer of technology, funding and employee mobility hinders transfer. His special area is in science and technology policy. He had worked for the State Science and Technology Commission of China for six years before he came to the US.     

The impact of participation in European joint research projects on knowledge creation and economic growth

This paper investigates the impact of participation in European scientific networks on the stock of knowledge and on economic growth. We use scientific links in FP programmes to weight foreign R&D in order to construct two different measures of foreign R&D spillovers and we assess their impact on the production of knowledge (patents) and on economic growth in a panel of countries participating in FP over the period 1994–2005. We find that participation in EU funded projects is an important channel of knowledge transfer. However, while for countries with high levels of R&D expenditure R&D spillovers contribute to the generation of new knowledge, for low R&D spenders knowledge spillovers facilitate technological imitation and catching up.     

University and inter-firm R&D collaborations: propensity and intensity of cooperation in Europe

This paper investigates the determinants of firms’ decision to cooperate in R&D with universities and the intensity of the cooperation effort, in relation to the engagement in inter-firm R&D collaborations. Using novel survey data for seven EU countries between 2007 and 2009, our analysis accounts for unobservable factors influencing R&D cooperation forms and addresses the main endogeneity issues. We find that internal knowledge, appropriability conditions and incoming spillovers explain a large variation of the probability and of the intensity of R&D collaborations of European firms with universities (and comparably with unaffiliated companies).     

Estimating intersectoral technology spillovers for Brazil

This paper aims to evaluate the main intersectoral R&D flows in the Brazilian economy, determining their direction and magnitude. Unlike other studies that focus exclusively on rent spillovers flows of R&D, this paper also calculates spillovers with total spending on innovation in addition to R&D expenditure. In the case of developing countries, where R&D is of lower relative importance, we assume that technological effort is measured more accurately if it is considered as different types of innovative expenditure. We used data from the Technological Innovation Survey, conducted by the Brazilian Institute of Geography and Statistics with the support of Ministry of Science and Technology and data from an input–output matrix for the Brazilian economy, calibrated by Laboratório de Analises Territoriais e Setoriais—LATES of the Federal University of Juiz de Fora. The analysis is from the year 2011 and covers 32 sectors of economic activity resulting from the compatibility of the two databases. The main results show a mapping of the intersectoral flow of knowledge embodied both by the total expenditure on innovation and by in-house R&D to Brazil for the year 2011. It is important to highlight the wealth of detail of such a mapping, as it characterizes not only by sectoral interdependence of these aspects, but it also shows the direction of flows, the sectoral hierarchy in terms of “donation” of technical knowledge and the intersectoral flows in terms of technological intensity.     

Policy Issues for R&D Investment in a Knowledge-Based Economy

The Internet Revolution induced an unbalanced perspective on future economic growth strategies. Because information technology (IT) largely constitutes an infrastructure upon which other economic activity is based, its economic role is to facilitate the productivity of investment in a wide range of products and services that meet final demand. Other economies around the world can and are investing in the same infrastructure, so the efficiency advantages now being realized by the U.S. economy will be fleeting unless U.S. R&D efforts produce a new and broad range of innovative products and services that take advantage of this infrastructure. A deep and diverse technology-based manufacturing sector must be a core objective of a national R&D strategy. United States manufacturing contributes $1.5 trillion to GDP, employs 20 million workers, accounts for more than 70% of industrial R&D, and constitutes the main source of technology for the larger service sector. While knowledge-based services are the largest source of economic growth for the U.S. economy, their long-term performance is highly dependent on synergies with a domestic manufacturing sector. These synergies will be even more important in the future because services are increasingly exposed to foreign competition. Knowledge-based services can be supplied from anywhere in the world—as long as these foreign sources can rapidly access and assimilate the necessary technology components. This caveat is the critical point for economic growth policy. Considerable research supports the argument that hardware and software components are most efficiently supplied to services by a manufacturing sector that is geographically close and institutionally integrated with the service applications. Policy debates have raged for decades over the nature and magnitude of underinvestment in manufacturing R&D. The need to resolve the relevant policy issues has increased, as industry is funding less of the long-term, high-risk research that creates the technology platforms supporting new industries and future economic growth. Unfortunately, only about a third of U.S. manufacturing is high-tech by conventional definitions. Some of the remaining industries develop technologies internally, but most purchase a large proportion of their technology from the high-tech sector. Because a technology acquisition strategy can be more easily imitated by foreign competitors, traditional industries are much more susceptible to exchange rate variations, global economic cycles, and secular shifts in foreign competition. Thus, with global technological capabilities relentlessly increasing, the long-term prospects for the moderate and low R&D-intensive portions of U.S. manufacturing are not good. This paper presents a conceptual framework and available data as inputs for the analysis of Federal R&D investment strategies. Such strategies must recognize the full range of public and private technology assets constituting a national innovation system. A developed and efficient innovation system has characteristics making imitation by foreign competitors difficult and thereby enables sustained competitive advantage.     

Location choices within global innovation networks: the case of Europe

Rapid growth in internationalization of corporate R&D has spurred considerable interest since the 1990s. Foreign R&D is still mainly driven by the expansion of international production, but technology sourcing has become an increasingly important driver of dispersion. Actually, differences across sectors and companies tend to obscure the mix of motivations behind the development of global innovation networks. This paper distinguishes the various drivers of the international dispersion of corporate R&D in order to elaborate a typology of foreign R&D units, including in emerging countries. This typology is used to discuss the emergence of differentiated global innovation networks and the location choices by type of R&D unit. It is applied to foreign R&D projects in Europe in high and low cost countries between 2002 and 2005. It is then used to discuss the weakening attractiveness of the European Union for R&D activities and the relevant policies that countries can design to attract different types of units.

Tripartite decomposition of labor productivity growth,FDI and human development: evidence from transition economies

This study investigates the relative contribution of technological change, technological catch-up and capital deepening as drivers of labor productivity growth in 14 transition economies during the period 2000–2012. In addition, the study extends the usual decomposition of labor productivity growth by encompassing the impact of foreign direct investment (FDI) on labor productivity growth in transition economies. To illustrate the relative contribution of FDI as a driver of labor productivity growth, we present a simple theoretical model that augments Kohli [Labour productivity vs. total factor productivity. IFC Bulletin 20 (April), Irving Fisher Committee on Central Bank Statistics, International Statistical Institute, 2005] and Grosskopf et al. (Aggregation, efficiency, and measurement, Springer, New York, pp 97–116, 2007) decomposition of the labor productivity. The insights derived in this model provide an underpinning to the empirical analysis in this study. Using Blundell–Bond dynamic panel General Method of Moments estimators, the main finding of dynamic panel data regressions shows that technological catch-up, technological change, and human development level, trade and demographic of population ageing are the main factors that affect labor productivity growth in transition countries. Furthermore, the findings of dynamic panel data regressions show insignificant positive impact of FDI on productivity growth in transition economies. One explanation is that the 14 transition economies that are included in this study do not reach a minimum human development threshold level.     

The relation between technology import and domestic R&D

The relation between domestic R&D and imports of technology is examined for 10 countries. Simple regressions revealed strong complementarity for each of the countries. Multiple regressions including GNP per capita and number of scientists and engineers were performed for the five countries with time series for all the variables. Strong complementarity was found between technology imports and domestic R&D and other variables for Japan and South Korea, weak for France, none for Germany and the US. Excluding government-financed R&D in the US resulted in a substitutive relation. Japan revealed a sharp decline in the ratio of technology payments to R&D spending; Korea is following in its steps. Complementarity appears to weaken in later stages as technology development strategies shift from dependent to imitative to autonomous or offensive technology development.     

A bit of basic,a bit of applied? R&D strategies and firm performance

The Journal of Technology Transfer - Most studies analysing the relationship between R&D and firm growth focus on total R&D investment. This paper aims to analyse separately each...     

Innovation capacity and economic development: China and India

Decomposing the GDP growth from 1981 to 2004, this paper finds that innovation capacity has contributed significantly to the economic growth of China and India, especially in the 1990 s. Outputs of the national innovation system, measured by patents and high-tech/service exports, demonstrate the considerable progress China and India have made in innovation capacity. The enhanced innovation capacity of China and India is primarily due to their heavy investment in the inputs of innovation system, i.e., R&D expenditure and R&D personnel, in recent decades. This paper emphasizes the role that the governments have played in promoting innovation capacity and their contribution to economic development. Both governments have transformed their national innovation systems through linking the science sector with the business sector, providing incentives for innovation activities, and balancing import of technology and indigenous R&D effort. Using case studies of domestic biotech firms in China and India, this paper also offers micro-level insights on innovation capacity and economic development: (1) innovation capacity has become essential for domestic firms?? market success and (2) global institutional factors and national government policies on innovation have considerable influence on the choice of innovation at the firm level, i.e., to conduct indigenous R&D or to import foreign technology.     

Transforming the Post-Soviet Research Systems Through Incubating Technological Entrepreneurship

For many years the Soviet Union and the Eastern block countries (member countries of the former Warsaw pact) had been considered as the main military competitors of the western countries buttressed in their struggle against the West by their economic and scientific resources. The Warsaw pact countries had high levels of R&D investments, a large number of researchers and engineers, and diverse research facilities. On the other hand, output indicators (patent applications, number of papers, scientific citations, etc.), and especially the rates of technological innovation were not so impressive. This paper analyzes the sources of these differences with special attention to the functions played by science and technology (S&T) programs in the formerly communist societies of Europe and Russia. The dynamics of changes in the R&D potential in these countries are considered along with ways and possible scenarios of convergence towards the national systems of innovation of developed western economies. Special emphasis is assigned to the constructive role that technology transfer and commercialization processes along with the use of a network of virtual incubators and the promotion of technological entrepreneurship, can play in fostering a socio-economic renaissance in Eastern Europe and Russia.     

Government strategies to attract R&D-intensive FDI

Competition among countries to attract the research and development (R&D) activities of multinational enterprises has increased substantially during the last years, but the strategies used by governments in this competition still remain largely unexplored. This paper addresses that gap by proposing a taxonomy of the policy instruments available to stimulate inward R&D-intensive foreign direct investment (FDI) and presenting the results of a comparative case study of two EU countries: Spain and Ireland. The main conclusion is that an efficient promotion of R&D-intensive FDI calls for a closer connection between innovation policy and inward investment promotion, which are two policy areas that have traditionally operated rather separately. In addition, investment promotion agencies targeting R&D-intensive FDI are advised to reconfigure the scope of services they provide by placing more emphasis on after-care, since R&D-intensive FDI tends to be evolutionary rather than purely greenfield.

Industrial R&D Laboratories: Windows on Black Boxes?

This paper provides an overview of the survey-based literature on industrial Research and Development (R&D) laboratories, beginning with the work of Edwin Mansfield. Topics covered include R&D projects, new products, and new processes; the appropriability of intellectual property; the limits of the firm in R&D; and spillovers of knowledge from other firms and universities into the laboratories. I discuss the value of collecting information from industrial R&D managers, who participate in a wide range of R&D decisions and are the natural best source of information on these decisions. I also emphasize gaps in our knowledge concerning R&D from past studies, such as the private and social returns to R&D, the nature of firms' R&D portfolios, and other topics. The paper closes with a discussion of the benefits from building a national database on R&D laboratories that could be shared among researchers and that could take this area of research to a new and higher level of achievement.     

Maximizing R&D investments in the Department of Energy's Environmental cleanup program

The investment made in research and development (R&D) by the Department of Energy's (DOE) Environmental Management (EM) program must result in products that will significantly benefit the Department's cleanup efforts. A customer-oriented decision-making process for managing technology development is needed to appropriately link technology development activities with cleanup operations. This paper presents a process for R&D management, which we have named the Technology Investment Decision Model.The model identifies six R&D stages leading to technology implementation. The model incorporates decision points (or “gates”) within the R&D process where projects are selected for funding. The purpose of this “stage-gate” process is to ensure early evaluation of projects against technical and nontechnical criteria in order to ensure that end products will not only provide superior performance, but also meet the acceptance requirements of the intended customers. The model addresses the technology transfer and commercialization factors that must be considered to get technological innovations into the marketplace. The model is now being implemented within the EM technology development program and is providing a common framework to align the Department's environmental R&D activities with its cleanup goals.     

Venture’s economic impact in Australia

We empirically compare the contributions of venture capital (VC) and private equity backed firms, including those backed by government subsidized innovation investment funds (IIFs), in the Australian economy by analyzing employment, R&D, patents, time to IPO, and market capitalization from market inception to August 2012. Overall, the data highlight a central role for VC and IIF investment in facilitating R&D, innovation, and economic growth. Our IIF findings highlight the success of government sponsorship of VC under the Australian program design, which is sharply in contrast with the lack of success of government venture programs in other countries.