Investigating the Contribution of R&D and ICT Investments in Total Factor Productivity Growth: Evidence from Quebec’s Manufacturing SMEs

Alphonse G. Singbo (), Cokou P. Kpadé and Lota D. Tamini
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Alphonse G. Singbo: Laval University
Cokou P. Kpadé: Université du Québec en Abitibi-Témiscamingue
Lota D. Tamini: Laval University

Journal of Quantitative Economics, 2025, vol. 23, issue 3, No 4, 735-762

Abstract: Abstract Investment in research and development (R&D) and information and communication technologies (ICT) enable firms to better organize their operations and effectively manage risks and uncertainties. This is particularly evident in capital-intensive industries such as those in the manufacturing sector in Quebec, where short-term flexibility is limited due to high adjustment costs and a recurrent labor shortage. By accounting for endogeneity in fixed capital stocks and variable inputs, we utilize unbalanced firm-level panel data from Quebec spanning from 2001 to 2018 to estimate input demand, substitution elasticities, and total factor productivity (TFP) growth. Results consistently indicate that TFP growth is declining due to high volatility in the demand for fixed capital, specifically for R&D and ICT. The effects of technical progress induced by R&D are very low and generally negative, implying that firms utilize investments in R&D to compensate for weak innovation or a lack of technical progress.

Keywords: R&D and innovation; Generalized Leontief; Inputs demand; Total factor productivity; Quebec (search for similar items in EconPapers)
JEL-codes: C33 D24 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40953-025-00447-9

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