This paper presents a single unified framework that integrates the theoretical literature on Schumpeterian endogenous growth and major strands of the empirical literature on R&D, productivity growth and productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992, 1998), we provide microeconomic foundations for the reduced-form equations for total factor productivity (TFP) growth frequently estimated empirically using industry-level data. R&D affects both innovation and the assimilation of others' discoveries (ӡbsorptive capacityԩ.Long-run cross-country differences in productivity emerge endogenously, and the analysis implies that many existing studies underestimate R&D's social rate of return by neglecting absorptive capacity.
Authors
Rachel Griffith
CPP Co-Director, IFS Research Director
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
Stephen Redding
John Van Reenen
Journal article details
- Publisher
- Blackwell Publishing
- Issue
- March 2003
Suggested citation
R, Griffith and S, Redding and J, Van Reenen. (2003). 'R&D and Absorptive capacity: theory and empirical evidence' (2003)
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