R&D Efficiency and Barriers to Entry: A Two Stage Semi-Parametric DEA Approach

This paper assesses the relative efficiency of knowledge production in the OECD using a nonparametric DEA approach. In general, resources allocated to R&D are limited and therefore must be used efficiently, given the institutional and legal constraints. The efficiency scores presented are based on an intertemporal frontier estimation for the period 1995 to 2004. We analyze the impact of the regulatory environment using the single bootstrap procedure suggested by Simar and Wilson (2007a). The empirical evidence supports our hypothesis that barriers to entry aimed at reducing competition actually lower R&D efficiency by attenuating the incentives to innovate and to allocate resources efficiently.