The Determinants of R&D Investment: A Survey of the Empirical Research

This paper offers an extensive survey and a critical discussion of the empirical literature on the driving factors of R&D. These factors are subsumed under five broad types. The paper first summarises the key predictions from theory regarding each type's R&D effect. It then examines for which factors differences in the theoretical predictions can also be found in empirical studies, and for which factors the empirical evidence is more unanimous. As the focus is on the empirical literature, methodological issues are also highlighted. The major factor types identified in the literature are, individual firm or industry characteristics, particularly internal finance and sales; competition in product markets; R&D tax credits and subsidies; location and resource related factors, such as spillovers from university research within close geographic proximity, membership of a research joint venture and cooperation with research centres, and the human capital embodied in knowledge workers; and spillovers from foreign R&D. Although on balance there is a consensus regarding the R&D effects of most factors, there is also variation in results. Recent work suggests that accounting for nonlinearities is one area of research that may explain and encompass contradictory findings.