The impact of R&D incentives and sectoral knowledge stocks on R&D outcomes

ABSTRACT

Given the importance of technological improvement for economic growth, policies are designed to enhance technological progress. A very common policy approach is to provide incentives to R&D (research and development) activities to improve the possibility of favorable outcomes. This study investigates the impact of R&D incentives on R&D outcomes measured in terms of patent applications and patent grants. The analysis focuses on the data for four sectors from 15 high-income countries covering the 2007 to 2019 period. A U-shaped pattern is observed to dominate the relationship between R&D incentives and R&D outcomes. For incentives to have positive impacts on R&D outcomes, they must be of a considerable portion of the national income. The study also covers the knowledge stocks and the implied spill-overs across sectors. The analysis does not reveal a single sector that generates innovative spill-overs to all the other sectors.

KEYWORDS:

• R&D policy;innovation incentives
• patents;instrumental variables
• 2SLS estimation

JEL CODES:

• O38
• O31
• C36

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This paper is based on a part of Ipek Akad's dissertation. Akad received financial support from the International Research Fellowship Program for PhD Students (2214-A) of the Scientific and Technological Research Council of Turkey (TUBITAK). The authors would like to acknowledge TUBITAK for allowing this research work.