WHAT DETERMINES INDUSTRIAL R&D EXPENDITURE IN THE UK?*

Abstract

In this paper we identify some of the factors behind the comparatively poor R&D performance of the UK in the 1990s, when R&D intensity in the business sector declined consistently. We estimate an econometric model of R&D using a panel of UK manufacturing industries. Our results highlight the importance of industry characteristics such as sales and profitability, product market competition, macroeconomic factors such as interest and exchange rates, and the composition of R&D expenditure and funding. A rise in the share of government-funded R&D or the share of foreign R&D is found to have a positive impact on aggregate R&D expenditure.

Does the Stock Market Reward Innovation? European Stock Index Reaction to Negative News During the Global Financial Crisis

“…Governments should also avoid unnecessary cuts in R&D expenditures even during the crisis periods, as cutting R&D expenditure may have a significant negative impact on competitiveness the long-term. Becker and Pain (2008), for example, show that the poor performance of the UK manufacturing sector during the 1990s was caused by the decline in UK government financing of R&D projects in the preceding periods.…”

Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors

“…First, the results cannot easily be generally applied to all firms, but should be considered pertinent to large firms heavily engaged in R&D activities. Second, this kind of 'pick the winner' effect is particularly severe in low-tech sectors, where the 'real' population is dominated by small firms with little or no R&D investment (Becker and Pain, 2002). …”

Foreign Direct Investment in R&D and Exchange Rate Uncertainty

“…Nominal R&D performed by higher education in the UK as a whole was deflated by the GDP deflator. For further information about the data, see Becker and Pain (2008).…”