2006-06-10 papers

on Technology and Industrial Dynamics

Issue of 2006–06–10
one paper chosen by
Fulvio Castellacci, Universitetet i Oslo

Internal and external R&DF complements or substitutes? Evidence from a dynamic panel data model By Boris Lokshin; Rene Belderbos; Martin Carree

Internal and external R&DF complements or substitutes? Evidence from a dynamic panel data model

By:	Boris Lokshin; Rene Belderbos; Martin Carree
Abstract:	We examine the impact of internal and external R&D on labor productivity in a 6-year panel of 304 innovating firms. We apply a dynamic linear panel data model that allows for decreasing returns to scale in internal and external R&D with a non-linear approximation of changes in the knowledge stock. We find complementarity between internal and external R&D, with a positive impact of external R&D only evident in case of sufficient internal R&D. The findings confirm the role of internal R&D in enhancing absorptive capacity and hence the effective utilization of external knowledge. These results suggest that empirical studies examining complementarities between continuously measured practices should adopt more general non-linear specifications to allow for correct inferences.
Keywords:	R&D, Innovation, Complementarity, Dynamic panel data, Productivity
JEL:	O32 O33 D24
Date:	2006–05
URL:	https://d.repec.org/n?u=RePEc:hst:hstdps:d06-163

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