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What drives business Research and Development (R&D) intensity across Organisation for Economic Co-operation and Development (OECD) countries?

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This paper empirically investigates the potential determinants of business-sector R&D intensity using a panel of OECD (countries for the period of 1975–2002 with data measured as five-year averages). Estimates using a system GMM estimator controlling for endogeneity show a high degree of persistence in business-sector R&D expenditures. Tax incentives for R&D have a significant and positive impact on business R&D spending regardless of the specification and estimation techniques. Furthermore, we find that expenditures for R&D performed by universities are significantly positively related to business enterprise sector expenditures on R&D indicating that public sector R&D and private R&D are complements. Direct R&D subsidies and the high-tech export share are significantly positively related to business-sector R&D intensity, but these effects are only significant using the first-differenced GMM estimator. The static fixed effects results show that countries characterised by strong patent rights appear to have higher R&D intensities, but this effect is no longer significant in the dynamic panel data model.

Document Type: Research Article


Affiliations: Austrian Institute of Economic Research WIFO, PO Box 91, A-1103, Vienna, Austria

Publication date: 2006-03-20

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