Innovation and Economic Growth

This paper surveys the empirical evidence on the link between innovation and economic growth. It considers a number of different measures of innovation, such as R&D spending, patenting, and innovation counts, as well as the pervasive effect of technological spillovers between firms, industries, and countries. There are three main conclusions. The first is that innovation makes a significant contribution to growth. The second is that there are significant spillovers between countries, firms and industries, and to a lesser extent from governmentfunded research. Third, that these spillovers tend to be localized, with foreign economies gaining significantly less from domestic innovation than other domestic firms. This suggests that although technological ‘catch-up’ may act to equalise productivity across countries, the process is likely to be slow and uncertain, and require substantial domestic innovative effort. This paper was produced as part of the Centre’s Programme on Corporate Performance and Work Organisation INNOVATION AND ECONOMIC GROWTH