Impact of Research and Development on Productivity

​Impact of Research and Development on Productivity

Studies in other countries have found that investments in Research and Development (R&D) can lead to productivity improvements. Our study quantifies the impact of R&D on productivity at both the overall economy and firm levels in Singapore.

At the overall economy level, we find that R&D has a positive and significant correlation with productivity. In particular, between 1978 and 2014, a $1 increase in R&D stock was associated with an increase in multi-factor productivity of $0.28 and $1.01 in the short- and long-run respectively.

Similarly, our findings indicate that R&D has a positive and significant impact on productivity at the firm level. Over the period of 2002 to 2013, a $1 increase in R&D stock was found to raise productivity in a firm with a median value-added to R&D stock ratio by $0.35. Dividing this period into sub-periods that coincide with the Research, Innovation and Enterprise (RIE) funding tranches, we find that the dollar impact of R&D has increased over time, from $0.29 in 2002-2005, to $0.37 in 2006-2010, and then to $0.40 in 2011-2013.

Our findings thus suggest that continued investments in R&D can help to raise productivity in the years ahead.

The views expressed in this paper are solely those of the authors and do not necessarily reflect those of the Ministry of Trade and Industry or the Government of Singapore.

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