Torje Hegna, Karen Helene Ulltveit-Moe, 31 August 2021

Though R&D is a key driver of productivity growth, the effects of immigration on R&D investment remain poorly understood. This column investigates the impact that a large immigration shock – in this case, the sudden influx of migrants to Norway following the 2004 enlargement of the EU – had on R&D investments. The results suggest that immigration shocks can have a negative impact on a receiving country’s R&D investments, with potentially long-term consequences for productivity growth.

Xuelin Li, Andrew Lo, Richard Thakor, 11 August 2021

Innovation is a key driver of economic growth, and incentivising research and development is therefore a vital policy goal. This column explores the role of competition policy in stimulating innovation by pharmaceutical firms. Specifically, the authors assess the effect that ‘pay-for-delay’ agreements have on firm-level research and development in the US. The results suggest that restricting the ability of firms to engage in pay-for-delay agreements appears to increase their incentives to innovate in the face of competition, although the aggregate effects are not clear-cut.

Sabrina Howell, Jason Rathje, John Van Reenen, Jun Wong, 08 May 2021

In recent decades, US defence R&D seems to have lost its lustre. To combat the declining innovation, in 2018 the US Air Force reformed its contracting procedures to allow applicants more freedom to suggest projects with potential military benefits. This column uses data on applications and winners from such competitions to assess the effects of the reform. It finds that the ‘open’ programme attracts new and younger firms, increases future venture capital investment, and increases patenting. Government R&D could thus benefit from more bottom-up, decentralised approaches to promote innovation in the public sector. 

Florin Maican, Matilda Orth, Mark Roberts, Van Anh Vuong, 26 January 2021

Firms’ incentives to undertake innovation investments can be affected by their activities in domestic and international markets. This column uses a structural framework to estimate the returns to innovation investments and analyse the impact of trade on those returns. It shows that a firm’s R&D investments raise its future productivity in both domestic and export markets, with a larger impact in the export market. Furthermore, it shows that public efforts to stimulate innovation investments can be offset by trade restrictions limiting access to world markets. These findings are important for policymakers to recognise when fostering innovation. 

Maarten De Ridder, Coen Teulings, 13 July 2017

Around the world, growth has yet to recover to its pre-Global Crisis trend. This column uses the crisis as a quasi-natural experiment to test the endogenous growth hypothesis, which suggests that output has not recovered because the crisis affected the rate of technological progress. Firms that preferred a bank that was more severely affected by the crisis experienced a large fall in R&D investment and a persistent fall in output in subsequent years. This suggests a direct link between R&D and future productivity, as predicted by endogenous growth models.

Bettina Peters, Mark Roberts, Van Anh Vuong, 01 May 2016

Research and development investment is a major driving force behind innovation and economic growth. Policy measures that aim to boost innovation activities attempt to improve incentives for these investments. This column reports on recent research showing that a firm’s financial strength is strongly correlated with the firm’s expected return to research and development, and therefore has a substantial impact on its research and development investment decision. 

Joan Costa-Font, Alistair McGuire, Victoria Serra-Sastre, 19 January 2013

Although healthcare innovation can make treatment cheaper, it can also make policy decisions more difficult by introducing new, better but more expensive technologies. This column argues that, unlike other technologies, healthcare technology is intermediated by insurance mechanisms, both private and public. Although health insurance coverage incentivises expenditure on innovation, it does not seem to heighten technology adoption, a challenge to the idea that innovation increases healthcare costs. Indeed, evidence suggests that technology diffusion is limited by other institutional barriers.

Roger Bandick, Holger Görg, Patrik Karpaty, 15 January 2011

With foreign ownership of domestic companies becoming increasingly common, questions are mounting as to the consequences. One area of concern is the effect on research and development. This column presents new evidence from Sweden, where flagship firms such as Volvo and Saab are now foreign owned, that it hopes will reassure policymakers.

Sergey Lychagin, John Van Reenen, Margaret Slade, Joris Pinkse, 25 October 2010

Why do local policymakers fight so hard to attract research and development labs to their area? This column provides a possible explanation. Using patent data, it finds a strong link between R&D and growth caused by knowledge spillovers between firms.

Yuriy Gorodnichenko, Monika Schnitzer, 08 April 2010

How can poor countries stop playing catch up? The question continues to puzzle economists. This column argues that the innovative and productive activities of domestic firms in emerging markets are inhibited by financial frictions. Financial reforms will be most effective if they target the vulnerable small and young domestic firms and those in the service sector.

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