The Productivity Effects of Internal and External R&D: Evidence From a Dynamic Panel Data Model

Boris Lokshin, Rene Belderbos and Martin Anthony Carree

No 26, UNU-MERIT Working Paper Series from United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology

Abstract: We examine the impact of internal and external R&D on labor productivity in a 6-year panel of Dutch manufacturing firms. We apply a dynamic linear panel data model that allows for decreasing or increasing returns to scale in internal and external R&D and for economies of scope. 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. These findings confirm the role of internal R&D in enhancing absorptive capacity and hence the effective utilization of external knowledge. The scope economies due the combination of internal and external R&D are accentuated by decreasing results to scale at high levels of internal and external R&D. The analysis indicates that on average productivity grows by increasing the share of external R&D in total R&D.

Keywords: R&D; Innovation; Complementarity; Panel Data (search for similar items in EconPapers)
JEL-codes: O32 O33 D24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-ino, nep-ipr and nep-mic
Date: 2007
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Journal Article: The Productivity Effects of Internal and External R&D: Evidence from a Dynamic Panel Data Model (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:dgr:unumer:2007026

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