The Effect of Spillovers and Government Subsidies on R&D, International R&D Cooperation and Profits: Evidence from France

Firms m industrial countries invest vast sums in research and development (R&D) to create new products and new production processes. On a broader level, the ability of firms and of national innovation systems in general, to create, diffuse and use new knowledge has become a key to their success. Accordingly, economic research has devoted much effort towards understanding the links between R&D, innovation and productivity (Hall and Mairesse, 1995). Another path of research has focused on what drives R&D efforts from demand evolution to intellectual property rights, from technological opportunities to increased competition. Yet another series of works have stressed that R&D is not the sole determinant of innovation. While many empirical studies have highlighted the link between R&D and innovation (see Griliches, 1990) or between R&D and total factor productivity (see Mairesse and Sassenou, 1991), the use of panel and survey data has helped to underline that innovation also depends on the relations of the firm with its competitors suppliers and customers, science institutes and so on (OECD, 1997).