Internal and external R&D： complements or substitutes? Evidence from a dynamic panel data model

Boris Lokshin, Rene Belderbos and Martin Carree

Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: We examine the impact of internal and external R&D on labor productivity in a 6-year panel of 304 innovating firms. We apply a dynamic linear panel data model that allows for decreasing returns to scale in internal and external R&D with a non-linear approximation of changes in the knowledge stock. We find complementarity between internal and external R&D, with a positive impact of external R&D only evident in case of sufficient internal R&D. The findings confirm the role of internal R&D in enhancing absorptive capacity and hence the effective utilization of external knowledge. These results suggest that empirical studies examining complementarities between continuously measured practices should adopt more general non-linear specifications to allow for correct inferences.

Keywords: R&D; Innovation; Complementarity; Dynamic panel data; Productivity (search for similar items in EconPapers)
JEL-codes: D24 O32 O33 (search for similar items in EconPapers)
Date: 2006-05
New Economics Papers: this item is included in nep-eff, nep-ino and nep-tid
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:hst:hstdps:d06-163

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