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Determinants of R&D and Its Productivity: Identifying Demand and Supply Channels (First revision)

Sadao Nagaoka

No 03-12, IIR Working Paper from Institute of Innovation Research, Hitotsubashi University

Abstract: Identifying whether an exogenous factor affects R&D from a demand side or from a supply side is an important issue. This paper, first, theoretically shows that a favorable change in either side can reduce the R&D productivity in equilibrium, so that the reduced form estimation cannot provide a clear identification. Secondly, it estimates both structural and reduced form patent production functions, based on instrumental variables approach, using a large database on Japanese firms. According to the estimation, while the initial firm size, market concentration or export orientation increases R&D, none of them significantly shifts the structural patent production function.

Keywords: R&D productivity; patent; firm size; competition (search for similar items in EconPapers)
JEL-codes: L11 O31 O34 (search for similar items in EconPapers)
Date: 2003-06
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