Prague Economic Papers 2021, 30(3):253-271 | DOI: 10.18267/j.pep.767

Heterogeneity of Returns to Business R&D: What Makes a Difference?

Petr Pleticha ORCID...a,b
a CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences, Prague, Czechia
b Charles University, Institute of Economic Studies, Faculty of Social Sciences, Prague, Czechia

Business R&D spending has been shown to exert both direct and indirect positive effects on value added. Nevertheless, the heterogeneity of the returns to R&D has seldom been examined. Using detailed sectoral data from Czechia over the period 1995-2015, this study finds that privately funded business R&D has both direct and spillover effects, but that the publicly funded part of business R&D only leads to spillovers. The results further suggest that both upstream and downstream spillovers matter, regardless of the source of funding, and that during the period studied, R&D returns were heavily affected by the economic crisis. Lastly, private R&D offers significant returns only after reaching a critical mass, while the effects of public R&D spending do not display such non-linearity. This heterogeneity in the returns to business R&D should be reflected in innovation policy design.

Keywords: R&D returns, spillovers, Czechia
JEL classification: L14, O32, O33, O47

Received: November 4, 2019; Revised: June 25, 2020; Accepted: December 7, 2020; Prepublished online: February 10, 2021; Published: June 11, 2021  Show citation

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Pleticha, P. (2021). Heterogeneity of Returns to Business R&D: What Makes a Difference? Prague Economic Papers, 30(3), 253-271. doi: 10.18267/j.pep.767
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