The relationship between R&D and productivity growth in Canada and other major industrialized countries / by Pierre Mohnen. : EC22-191/1992E

This research monograph is part of the research effort that led to the publication of the Economic Council's earlier Statement "Pulling Together". Research and Development improves productivity through cost reduction or through market expansion. Professor Pierre Mohnen (Université du Québec à Montréal) was asked to survey the existing literature on the link between R&D and productivity growth, comparing the social and private rates of return on R&D to Canadian manufacturing productivity growth. This study shows that the rate of return on private R&D is greater than the rate of return on physical capital. Furthermore, higher rates of return are obtained more from: (a) basic than applied research; (b) company-funded than publicly-funded R&D; (c) and from R&D directed to generate new production processes than from new products. The benefits from one sector's R&D also spill over onto other firms. Therefore, the social rate of return from R&D is substantially higher than the private rate of return. Professor Mohnen's results also suggest that Canadian manufacturing as a whole benefits from foreign R&D spillovers.

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