The Rising Returns to R&D: Ideas are not getting harder to find

Yoshiki Ando, James Bessen and Xiupeng Wang

MPRA Paper from University Library of Munich, Germany

Abstract: R&D investment has grown robustly, yet aggregate productivity growth has stagnated. Is this because “ideas are getting harder to find”? This paper uses micro-data from the US Census Bureau to explore the relationship between R&D and productivity in the manufacturing sector from 1976 to 2018. We find that both the elasticity of output (TFP) with respect to R&D and the marginal returns to R&D have risen sharply. Exploring factors affecting returns, we conclude that R&D obsolescence rates must have risen. Using a novel estimation approach, we find consistent evidence of sharply rising technological rivalry. These findings suggest that R&D has become more effective at finding productivity-enhancing ideas but these ideas may also render rivals’ technologies obsolete, making innovations more transient.

Keywords: R&D; innovation; productivity; obsolescence (search for similar items in EconPapers)
JEL-codes: L10 O32 O33 (search for similar items in EconPapers)
Date: 2025-05
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Related works:
Working Paper: The Rising Returns to R&D: Ideas Are Not Getting Harder to Find (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:124764

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