CREAT: Census Research Exploration and Analysis Tool

Outsourced R&D and GDP Growth

March 2016

Written by: Anne Marie Knott

Working Paper Number:

CES-16-19

Abstract

Endogenous growth theory holds that growth should increase with R&D. However coarse comparison between R&D and US GDP growth over the past forty years indicates that inflation scientific labor increased 2.5 times, while GDP growth was at best stagnant. The leading explanation for the disconnect between theory and the empirical record is that R&D has gotten harder. I develop and test an alternative view that firms have become worse at it. I find no evidence R&D has gotten harder. Instead I find firms' R&D productivity declined 65%, and that the main culprit in the decline is outsourced R&D, which is unproductive for the funding firm. This offers hope firms' R&D productivity and economic growth may be fairly easily restored by bringing outsourced R&D back in-house.

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Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

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:
investment, production, company, productivity growth, growth, productivity increases, efficiency, productivity estimates, innovation, expenditure, revenue, inflation, regressing, productivity firms, firms productivity, gdp, funding, declining, externality, regress, outsourcing, outsourced, economic growth, sourcing

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:
National Science Foundation, Survey of Industrial Research and Development, Washington University, Business R&D and Innovation Survey, Business Research and Development and Innovation Survey

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