In this article I demonstrate the relationship between research and development expenditure, and rm productivity. Using … data envelopment, I construct a measure of the firm-level distance from the industry-wide productivity frontier. Firms ex …-ante further from the productivity frontier invest more in R&D. On average, a 1% larger distance from the frontier causes a 0 …

An average machine lags in terms of productivity and technological advancement behind a cutting-edge machine. This lag … production in the long term due to a higher future productivity level …