The Dynamics of R&D and Innovation in the Short-Run and in the Long-Run

Laura Bottazzi and Giovanni Peri

No 4479, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this Paper we estimate the dynamic relationship between resources used in R&D by some OECD countries and their innovation output as measured by patent applications. We first estimate a long-run cointegration relation using recently developed tests and panel estimation techniques. We find that the stock of knowledge of a country, it?s R&D resources and the stock of international knowledge move together in the long run. Then, imposing this long-run relation across variables we analyse the impulse response of new ideas to a shock to R&D or to a shock to innovation by estimating an error correction mechanism. We find that internationally generated ideas have a very significant impact in helping innovation in a country. As a consequence, a positive shock to innovation in a large country as the US has, both in the short and in the long run, a significant positive effect on the innovation of all other countries.

Keywords: Innovation; Panel cointegration; Error correction mechanism; International r&d spillovers (search for similar items in EconPapers)
JEL-codes: C23 F43 O31 (search for similar items in EconPapers)
Date: 2004-07
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Citations: View citations in EconPapers (4)

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