R&D and productivity: A firm level investigation of the Norwegian manufacturing industry

Abstract

For centuries researchers have grappled with the question: What drives technological progress which in turn powers the all important aggregated growth of the economy? We argue that this question is interesting because it lies at the centre of the endogenous growth theory, which stresses the role of the R&D investments rate as the foremost determinant for productivity growth rates. By utilising the well-known Cobb-Douglas production function we empirically test and quantify the role of R&D investment in a Norwegian manufacturing industry setting. Our firm-level findings lend support to the endogenous growth theory claim, of both a direct and an indirect R&D effect on firms’ productivity growth rates.