What promotes R&D? Comparative evidence from around the world

Abstract

R&D drives innovation and productivity growth, but appropriability problems and financing difficulties likely keep R&D investment well below the socially optimal level, particularly in high-technology industries. Though countries around the world are increasingly interested in using tax incentives and other policy initiatives to address this underinvestment problem, there is little empirical evidence comparing the effectiveness of alternative domestic policies and institutions at spurring R&D. Using data from a broad sample of OECD economies, we find that financial market rules that improve accounting standards and strengthen contract enforcement share a significant positive relation with R&D in more innovative industries, as do stronger legal protections for intellectual property. In contrast, stronger creditor rights and more generous R&D tax credits have a negative differential relation with R&D in more innovative industries. These results suggest that domestic policies directly dealing with appropriability and financing problems may be more effective than traditional tax subsides at promoting the innovative investments that drive economic growth.

Effects of patents versus R&D subsidies on income inequality

“…which show that a strengthening of patent protection and a raise in R&D subsidy s both lead to an increase in the technology growth rate g. These aggregate e¤ects of patent breadth and R&D subsidies are quite common in theoretical studies, such as Peretto (1998), Li (2001) and Chu (2011), and also consistent with empirical studies, such as Brown et al (2017) and Minniti and Venturini (2017). The following proposition summarizes these results.…”

“…In this case, the share of income owned by any household E is I;t (E) = (r t a t =e + w t )=(r t a t + w t ), where e 2 (0; 1) denotes the mass of entrepreneurs among the unit continuum of all households. Income inequality measured by the relative income between an entrepreneur and a worker is I;t (E)= I;t (W ) = 1 + 1 e r t a t =w t , 13 which indicates two e¤ects of innovation on income inequality. First, I;t (E)= I;t (W ) is increasing in r t capturing the e¤ect of innovation via the interest rate on income inequality.…”

“…This is the symmetric interest-rate e¤ect of patent protection and R&D subsidy s on income inequality I . However, these two policy instruments have an additional e¤ect on income inequality captured by the term (1 s) in (28), and this e¤ect is asymmetric between and s. To understand this asymmetric e¤ect, one can consider the ratio a t =w t = v t =w t = (1 s) =' derived from (9), (13) and (16). Interestingly, a t =w t is decreasing in R&D subsidy s but increasing in patent protection .…”

“…3 Many empirical studies have investigated the e¤ects of these two R&D policy instruments. Recent examples include Minniti and Venturini (2017), who …nd that R&D tax credits have positive e¤ects on productivity growth, and Brown et al (2017), who …nd that protection for intellectual property has positive e¤ects on R&D. Other studies such as Ja¤e and Lerner (2004), Bessen and Meurer (2008) and Boldrin and Levine (2008), …nd that patent protection may have blocking e¤ects on future innovation. We do not consider blocking patents in this study; see for example Chu (2009), Chu et al (2012) and Cozzi and Galli (2014) for an analysis of blocking patents in the Schumpeterian model.…”

Case Study on Manufacturing Technology Transfer and Implementation

“…The government-funded research institution, KITECH, is run from the budget provided by the government, and has been pushing R&D activity forward. In order to make sure that government-funded research institutions are able to execute and continue very in-depth R&D, government policies and budgetary support are very critical [13], [14]. Thus, it is important to properly reflect government policies to set the direction of R&D. The Korean government has been implementing the Manufacturing Innovation Strategy 3.0 based on Industry 4.0, aiming at capacity enhancement of the current manufacturing companies.…”