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CEP Discussion Paper
Corporate R&D and Productivity in Germany and the United Kingdom
Stephen Bond, Dietmar Harhoff and John Van Reenen
December 2003
Paper No' CEPDP0599:
Full Paper (pdf)

JEL Classification: L13; O31; C25

Tags: corporate governance; r&d; productivity; financial constraints; panel data

This paper analyzes differences in R&D spending and in the impact of R&D on productivity between German and UK firms. We confirm that German firms spend significantly larger amounts on R&D than their UK counterparts, even after controlling for firm size and industry effects. Using a dynamic production function approach, we find that the R&D output elasticity is approximately the same in both countries, implying a much larger rate of return on R&D in the UK than in Germany. We discuss several explanations for this result.