Returns of R&D Investment and Continuity : An Econometric Analysis for Spanish Manufacturing

This paper analyses the relationship between labour productivity growth and R&D investments of Spanish manufacturing firms during the 1990s. The purpose is to estimate the rate of return to R&D expenditures. The sample is composed by microdata from an unbalanced data panel of firms. Within the full sample, we differentiate a sub-sample where only firms with bigger continuity in technological investment are considered (most-innovative firms). In the full sample and in the sub-sample, the rate of return to R&D is estimated. We verify whether the firms that carry out R&D expenses with continuity generate growing positive effects upon the productivity. The econometric estimation applies the GMM method. According to the empirical results, it is confirmed that the rate of return to R&D is higher in firms that invest in R&D in a continuous way