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Research and Productivity

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  • Boyan Jovanovic
  • Yaw Nyarko

Abstract

We model research as a signal on an unknown parameter of a technology. We distinguish applied from basic research and show that firms in the same industry can optimally choose different research portfolios, and that basic research can seem to have a higher rate of return than applied research, even though it really doesn't -- essentially, firms on a 'fast track' upgrading policy opt for basic research but fast and slow-track upgrading policies can coexist in a long-run equilibrium. We also derive the lag structure for how R&D affects the firm's stock of knowledge. To a first approximation, the lags decay geometrically (as is typically assumed in practice) but the rate of decay is endogenous, and depends on how fast the firm is upgrading its technology.

Suggested Citation

  • Boyan Jovanovic & Yaw Nyarko, 1995. "Research and Productivity," NBER Working Papers 5321, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5321
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    Cited by:

    1. Wang, Eric C., 2010. "Determinants of R&D investment: The Extreme-Bounds-Analysis approach applied to 26 OECD countries," Research Policy, Elsevier, vol. 39(1), pages 103-116, February.
    2. Jeroen Klomp & Jacob de Haan, 2010. "Banking risk and regulation: Does one size fit all?," CPB Discussion Paper 164.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Soete, Luc & Verspagen, Bart & ter Weel, Bas, 2010. "Systems of Innovation," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1159-1180, Elsevier.
    4. Nico van Leeuwen & Arjan Lejour, 2006. "Bilateral FDI Stocks by sector," CPB Memorandum 164.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Machiel Mulder & Victoria Shestalova & Gijsbert Zwart, 2006. "Liberalisation of European energy markets: challenges and policy options," CPB Document 138.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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