Micro evidence of the effects of R&D on labour productivity for large international R&D firms

Purpose – The aim of this paper is to assess the effects of traditional inputs and firms' R&D capital on labour productivity growth. Design/methodology/approach – The study measures the effects of the traditional inputs on firms' productivity growth, through four procedures: OLS in first differences, within group, GMM in first differences and GMM system. Findings – Whatever the specification considered, the more efficient estimates obtained from the GMM system show a similar effect of the firm's R&D stock upon its labour productivity performance. Practical implications – The results suggest that physical capital plays a more prominent role for European firms than for US ones, while employees are more productive in the USA. Originality/value – By presenting some empirical evidence on the effects of R&D on labour productivity, at the firm level, the present study makes two main contributions to the existing literature. First, a unique firm‐level database for European and US firms is used. It is self evident that firms in these countries operate in different economic and institutional settings; as a consequence the results identify some robust common effects concerning the two areas considered (the USA versus Europe) at the micro level. Second, service and manufacturing sectors are merged.