The Impact of innovation on Growth and Employment Andrea Conte DG Economic and Financial Affairs European Commission 23 June 2008 Comments to R&D and productivity: Testing Sectoral Peculiarities Using Micro Data

SCOPE 1) Investigation of the R&D – Productivity Link 2) “Late-comer” Advantage Weaker R&D – Productivity Relationship in HT Sectors MICRO ASSESSMENT 3) Sectoral Breakdown using firm level micro data 4) Unbalanced Longitudinal database AIMS

LITERATURE R&D – Productivity Elasticity from 0.05 to 0.25 Higher productivity in High Tech Sectors Low Tech Sectors Griliches and Mairesse (1982) Wakelin (2001) Cuneo and Mairesse (1983) Tsai and Wang (2004) Verspagen (1995)

Source: Commission Services DATA AND METHODOLOGY 532 top EU R&D Investors from UK DTI ) Augmented Production Function 2) POLS and RE 3) “Pick the Winner” Bias Effect in Low Tech Sectors 4) Perpetual Inventory Method – Sector Depreciation 15% R&D Stock 6% capital Stock 5) Importance of Embodied Technological Change

Source: Commission Services GERD by sectors of performance and source of funds at the EU27 – 2006 Total GERD* as a % of GDP 1.84 Sector of Performance (% of total GERD) Business enterprises (BERD) Government (GOVERD) Higher Education (HERD) Private Non-Profit Sector 1.17 (63%) 0.25 (14%) 0.40 (22%) 0.02 (1%) Funded by - % terms- Business enterprises Government7.2 (BERDBYGOV) Higher Education Private Non- Profit Sector Abroad Total100