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Measuring the Returns of Research and Development: An Empirical Study of the German Manufacturing Sector over 45 Years

Author

Listed:
  • Guenter Lang

    (Faculty of Management Technology, The German University in Cairo)

Abstract
Motivated by recent statistics that show significant growth in labor productivity, this paper seeks to analyze the relationship between domestic R&D, knowledge stock and productivity dynamics. Time series data of the German manufacturing industry is used to estimate a variable cost function with the stock of knowledge being dependent upon current and past R&D spending. The estimates indicate that 50 percent of the effects of R&D on the knowledge stock appear within four years. However, the rate of return on R&D are shown to be drastically declining; recent rates of return on R&D are estimated to have reached an all-time low spanning the last 45 years. Current yields of R&D are only one third compared to the sixties. In conclusion, though the productivity slowdown of the seventies seems to have been overcome, this is not attributed to R&D investments.

Suggested Citation

  • Guenter Lang, 2008. "Measuring the Returns of Research and Development: An Empirical Study of the German Manufacturing Sector over 45 Years," Working Papers 10, The German University in Cairo, Faculty of Management Technology.
    • Handle: RePEc:guc:wpaper:10
    as

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    File URL: http://mgt.guc.edu.eg/wpapers/010lang2008.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Productivity; innovation; research; development; technology; productivity slowdown;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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