R&D and absorptive capacity: theory and empirical evidence

Rachel Griffith, Stephen Redding and John van Reenen

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper presents a single unified framework that integrates the theoretical literature on Schumpeterian endogenous growth and major strands of the empirical literatures on R&D, productivity growth, and productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992), (1998), we provide microeconomic foundations for the reduced-form equations for Total Factor Productivity (TFP) growth frequently estimated empirically using industry-level data. R&D affects both innovation and the assimilation of others’ discoveries (‘absorptive capacity’). Long-run cross-country differences in productivity emerge endogenously, and the analysis implies that many existing studies underestimate R&D’s social rate of return by neglecting absorptive capacity.

Keywords: absorptive capacity; endogenous growth; R&D; total factor productivity (TFP). JEL Classification codes: O10; O30; O47 (search for similar items in EconPapers)
JEL-codes: O10 O30 O47 (search for similar items in EconPapers)
Date: 2003-03
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Citations: View citations in EconPapers (201)

Published in Scandinavian Journal of Economics, March, 2003, 105(1), pp. 99-118. ISSN: 0347-0520

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Related works:
Journal Article: R&D and Absorptive Capacity: Theory and Empirical Evidence* (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:209

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