Emerging Tech

Does History Matter For The Relationship Between R&D, Innovation And Productivity?

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Executive Summary

This paper analyzes the relationship between R&D expenditures, innovation and productivity growth, taking into account the possibility of persistence in firms' behaviour. The authors study this relationship for a sample of Spanish manufacturing firms between 1990 and 2005, estimating a model with four equations: participation in technological activities, R&D intensity, the generation of innovations and the impact of these technological outputs on total factor productivity growth. The results reflect the existence of true state dependence both in the decision of R&D investment and in the production of innovations. The omission of this persistence leads to an overestimation of the current impact of innovations on productivity growth.

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