Heterogeneity of Returns to Business R&D: What Makes a Difference?
Published in Prague Economic Papers, 2021
Recommended citation: Pleticha, P. (2021). Heterogeneity of Returns to Business R&D: What Makes a Difference? Prague Economic Papers, 30(3), 253-271. https://pep.vse.cz/pdfs/pep/2021/03/01.pdf
Abstract
Business R&D spending has been shown to exert both direct and indirect positive effects on value added. Nevertheless, the heterogeneity of the returns to R&D has seldom been examined. Using detailed sectoral data from Czechia over the period 1995-2015, this study finds that privately funded business R&D has both direct and spillover effects, but that the publicly funded part of business R&D only leads to spillovers. The results further suggest that both upstream and downstream spillovers matter, regardless of the source of funding, and that during the period studied, R&D returns were heavily affected by the economic crisis. Lastly, private R&D offers significant returns only after reaching a critical mass, while the effects of public R&D spending do not display such non-linearity. This heterogeneity in the returns to business R&D should be reflected in innovation policy design.