This paper uses panel regression techniques to assess the policy determinants of private sector innovative
activity – proxied by R&D expenditure and the number of new patents – across 19 OECD countries. The
relationship between innovation indicators and multifactor productivity (MFP) growth is also examined
with a particular focus on the role of public policies in influencing the returns to new knowledge. The
results establish an empirical link between R&D and patenting, as well as between these measures of
innovation intensity and MFP growth. Innovation-specific policies such as R&D tax incentives, direct
government support and patent rights are found to be successful in encouraging the innovative activities
associated with higher productivity growth. However, direct empirical evidence of the positive effects of
these policies on productivity is less forthcoming. A pervasive theme from the analysis is the importance of
coupling policies aimed at encouraging innovation or technological adoption with well designed
framework policies that allow knowledge spillovers to proliferate. In particular, the settings of framework
policies relating to product market regulation, openness to trade and debtor protection in bankruptcy
provisions are found to be important for the diffusion of new technologies.
R&D, Patenting and Growth
The Role of Public Policy
Working paper
OECD Economics Department Working Papers
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