EU-US productivity gap: new insights based on recent corporate data

Raquel Ortega-Argilés, IN+ Center for Innovation, Technology and Policy Research Instituto Superior Técnico (IST)

With the exclusion of the short-term turbulence associated with the current recession, starting from the early '90s, a persistent divide both in terms of economic growth, labour productivity growth and total factor productivity growth can be found between the US and the EU. Previous empirical literature has found robust evidence of a positive and significant impact of R&D on firm performance, measured by different proxies according to the data availability. The literature also shows that the R&D vs firm productivity relationship differs between sectors (high-tech versus low-tech, manufacturing versus services); regions and time periods. The paper is aimed to disentangle some of the conclusions addressed by previous evidence and other complementary hypotheses that the literature has neglected using a more comprehensive sample of EU and US firms for an extended period of years.
The analysis conducted here is based on a longitudinal unbalanced panel of microdata extracted from a variety of sources, including companies’ annual reports. The sample is constructed by companies that account R&D costs belonging to US and EU 27. The final panel comprises 2,777 companies for the period (1990-2008). The results of the paper were obtained through an econometric analysis using panel methodologies, taking into account the sectoral, country and time dimensions of the available microdata.
Consistently with the previous literature, we found robust evidence of a positive and significant impact of R&D on productivity. Interestingly enough, the US revealed an advantage similar to the one emerged for the intangible R&D investments; thus, US firms resulted more efficient in getting productivity gains both from the R&D and the physical capital investments.
The obtained results show that the US economy is uniformly more efficient in getting productivity advantages from investments in R&D activities; while this is obvious for the whole economy, the efficiency gap is confirmed separately in services and manufacturing and – within manufacturing – both in the high-tech sectors and in the other industrial sectors. Hence, the transatlantic divide is not only a matter either of a lower R&D investment in Europe or of a European industrial structure specialised in middle and low-tech sectors. Summarizing, just increasing R&D is a necessary but not sufficient policy if the overall increase in productivity is the target.

About the speaker
Currently, Raquel Ortega-Argilés is a post doctoral researcher at IN+ Center for Innovation, Technology and Policy Research Instituto Superior Técnico (IST). Her main research interest is the innovation at firm level. Basically, her current research work focuses on SMEs, R&D and firm performance linkages, industrial dynamics, smart specialization, EU vs US R&D and productivity gaps. Before joining the IST, Raquel was a postdoctoral researcher at the IPTS, a joint research center of the European Commission (Seville, Spain), a senior research fellow in the Entrepreneurship, Growth and Public Policy group at the Max-Planck Institute of Economics (Germany) and a junior researcher at the Regional Quantitative Analysis research group of the University of Barcelona (Spain). She holds a PhD in Economics from the department of Econometrics and Statistics of the University of Barcelona, where she taught Statistics courses to Economics, Business Administration and Sociology undergraduate students. Her work has been published in international journals such as Research Policy, Annals of Regional Science, Investigaciones Regionales, Small Business Economics, Science and Public Policy, Empirical Economics or Contemporaneous Economic Policy; in refereed books on innovation and corporate governance topics and in working paper series such as the Max Planck working paper series on Economics. She is currently referee at the Regional Studies, Papers in Regional Science, Small Business Economics, Empirica, Research Policy, Industrial and Corporate Change, Investigaciones Regionales, Migration Letters, Journal of Economics and International Finance, Revista Estudios Regionales, African Journal of Business Management, Science and Public Policy, Journal of Business Venturing among other research outlets.

Venue: UNU-MERIT Conference Room

Date: 10 February 2011

Time: 12:30 - 13:30  CET