On the Link Between R&D, Innovation and Productivity: Panel Evidence for Dutch and French Manufacturing

This paper studies the relationship between R&D, innovation and productivity in Dutch and French manufacturing using an unbalanced panel of enterprise data from three waves of the Community Innovation Survey pertaining to the period 1994-2004. We estimate by FIML a simultaneous-equation model of R&D, innovation and productivity accounting for individual effects and correcting for sample selection bias. Four-year lagged R&D affects positively and significantly innovation which itself is positively related to productivity. Individual effects play an important role in the relationship and selectivity bias must be accounted for. Significant differences across countries are observed. ∗University of Maastricht, P.O. Box 616, 6200 MD Maastricht, The Netherlands; Room A4.27; Tel.: (+31) 43 388 4962; Fax: (+31) 43 388 4874; [email protected] †CREST-INSEE, NBER and Maastricht University; [email protected] ‡Cirano and Maastricht University, [email protected] §CESifo fellow and Maastricht University, [email protected]