FEEM working papers "Note di lavoro" series
2003 .034

On the relationship between R&D and productivity: a Treatment Effect analysis.


Authors: Claudio A. Piga, Giuseppe Medda, Donald Siegel
Series: Economy and Society
Editor: Gianmarco I.P. Ottaviano
Type: Journal
Keywords: total factor productivity,selectivity,Manufacturing,Firm level
JEL n.: C21,C80,D24,O30
JEL: Economics of Innovation and New Technology
Pages: Vol. 15(1)
Date: 2005

Abstract

This study uses firm level data from two detailed surveys of Italian manufacturing firms to study the relationship between R&D expenditures and productivity growth. The analysis considers the different contributions of various forms of R&D (product, process, internal, external in collaboration with universities, research centres and other firms) to Total Factor Productivity (TFP). Thus, this paper answers the call for more research on the links between a firm's external R&D and its productivity. In the cross-section econometric analysis, we estimate a Treatment Effects model based on the assumption that the decision to carry out R&D is endogenous. We found evidence supporting such a methodological approach. The main results reveal a positive and statistically significant relationship between the detailed measures of R&D and TFP. It is noteworthy that among external R&D investments, only expenditures for projects run in collaboration with other firms turn out to be highly significant, while cooperation in R&D with universities does not seem to lead to productivity enhancements.

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