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Return on R & D investment: poor for public, high for private

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  • Return on R & D investment: poor for public, high for private

    Interesting study by the BLS looking at correlations (if any) between R & D expenditures and productivity growth - i.e. does R & D spending benefit the economy?

    V. Conclusions.

    Recent decisions to include research and development expenditures in the System of National Accounts raise important new questions for statisticians in developed and developing countries. Many of the benefits of R&D are not obtained by the original investors, but instead leak out to other firms, customers and even other nations. Because the asset and spillover influences of R&D have different time horizons, it is useful to establish separate “national R&D stocks” for each purpose.

    Hall concludes (1993, page 317) that greater competition, much of it foreign, reduced the U.S. private return to R&D in the 1980’s, but had less of an impact on social returns to R&D. As R&D increased in other countries, the United States perhaps lost some monopoly power over innovation (Freeman (2005)).

    In developing countries, technology typically adopts and modifies advances created in the wealthy nations, so information on innovations, such as patents, provides a less complete picture of new technology.