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R&D and absorptive capacity : theory and empirical evidence

Griffith, Rachel, Redding, Stephen and Van Reenen, John (2003) R&D and absorptive capacity : theory and empirical evidence. Scandinavian Journal of Economics, 105 (1). pp. 99-118. ISSN 1467-9442

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This paper presents a single unified framework that integrates the theoretical literature on Schumpeterian endogenous growth and major strands of the empirical literatures 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 (‘absorptive capacity’). 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.

Item Type: Article
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Additional Information: This is an electronic version of an Article published in the Scandinavian Journal of Economics 105(1) pp. 99-118 © 2003 Blackwell Publishing. LSE has developed LSE Research Online so that users may access research output of the School. Copyright © and Moral Rights for the papers on this site are retained by the individual authors and/or other copyright owners. Users may download and/or print one copy of any article(s) in LSE Research Online to facilitate their private study or for non-commercial research. You may not engage in further distribution of the material or use it for any profit-making activities or any commercial gain. You may freely distribute the URL ( of the LSE Research Online website.
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Date Deposited: 17 Feb 2008

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