Returns to Research and Development (R&D) Among Firms in Singapore

Leveraging a panel dataset from the Agency for Science, Technology and Research’s (A*STAR) annual R&D survey, this study provides an overview of Singapore’s R&D landscape. It also examines the impact of R&D investments on firm-level productivity in Singapore, and how this impact has changed across the various Science and Technology (S&T) and Research, Innovation and Enterprise (RIE) Plans.

Our study finds that there are positive returns to firm-level productivity from R&D investments. Over the period of 2002 to 2017, a 1 per cent increase in R&D stock in a firm led to a 0.135 per cent increase in productivity on average. In dollar terms, a $1 increase in R&D stock raised productivity in a median firm (defined as having a median value-added to R&D stock ratio) by $0.24. The elasticity and dollar impact of R&D have also increased across the S&T and RIE Plans. Specifically,the elasticity rose from 0.107 for S&T Plan 2005 (2002-2005) to 0.168 for the first two years of RIE Plan 2020 (2016-2017). Meanwhile, the dollar impact rose from $0.20 in 2002-2005 to $0.28 in 2016-2017.

These findings suggest that the government should continue to leverage R&D investments, along with other efforts under the Industry Transformation Maps, to raise the productivity of firms and industries in Singapore. Our efforts to raise the R&D and innovative capacity of our firms will be key to the transformation of our industries and Singapore’s next phase of growth.

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 (MTI), A*STAR or the Government of Singapore.

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