Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 408: A New Approach to Estimation of the R&D-Innovation-Productivity Relationship

Christopher F Baum (), Hans Lööf (), Pardis Nabavi () and Andreas Stephan ()
Additional contact information
Christopher F Baum: Department of Economics, Boston College and Department of Macroeconomics, DIW Berlin
Hans Lööf: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: SE-100 44 Stockholm, Sweden
Pardis Nabavi: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: SE-100 44 Stockholm, Sweden
Andreas Stephan: Jönkoping International Business School and Centre of Excellence for Science and Innovation Studies.

Abstract: We evaluate a Generalized Structural Equation Model (GSEM) approach to the estimation of the relationship between R&D, innovation and productivity that focuses on the potentially crucial heterogeneity across technology and knowledge levels. The model accounts for selectivity and handles the endogeneity of this relationship in a recursive framework. Employing a panel of Swedish firms observed in three consecutive Community Innovation Surveys, our maximum likelihood estimates show that many key channels of influence among the model's components differ meaningfully in their statistical significance and magnitude across sectors defined by different technology levels.

Keywords: R&D; Innovation; Productivity; Generalized Structural Equation Model; Community Innovation Survey

JEL-codes: C23; L60; O32; O52

22 pages, June 1, 2015

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