R&D, Patents, and Productivity A National Bureau of Economic Research Conference Report R&D, Patents, and Productivity Zvi Griliches Edited by The University of Chicago Press Chicago and London TheUniversityofChicagoPress,Chicago60637 TheUniversityofChicagoPress,Ltd.,London ©1984bytheNationalBureauofEconomicResearch Allrightsreserved.Published1984 Paperbackedition1987 PrintedintheUnitedStatesofAmerica 96959493929190898887 65432 LIBRARY OFCONGRESS CATALOGING IN PUBLICATION DATA Main entry under title: R&D, patents, and productivity. Papers presented at a conference held in Lenox, Mass., in the fall of1981, and organized by the National Bureau of Economic Research. Includesindexes. 1. Research, Industrial-UnitedStates-Congresses. 2. Patents-UnitedStates-Congresses. 3. Industrial productivity-UnitedStates-Congresses. I. Griliches, Zvi, 1930- II. National BureauofEconomic Research. III. Title: Rand D, patents, and productivity. HD30.42.U5R2 1984 338'.06 83-18121 ISBN0-226-30883-9(cloth);0-226-30844-7(paper) National Bureau ofEconomic Research Officers Walter W. Heller, chairman FranklinA. Lindsay, vice-chairman CharlesA. Walworth, treasurer Eli Shapiro,president Sam Parker, directoroffinance and David G. Hartman, executivedirector administration Directors at Large Moses Abramovitz FranklinA. Lindsay BertSeidman GeorgeT. Conklin, Jr. Roy E. Moor Eli Shapiro Jean A. Crockett GeoffreyH. Moore StephenStamas Morton Ehrlich Michael H. Moskow Lazare Teper Edward L. Ginzton James J. O'Leary DonaldS. Wasserman David L. Grove Peter G. Peterson Marina v. N. Whitman Walter W. Heller Robert V. Roosa Saul Klaman Richard N. Rosett Directors by University Appointment Charles H. Berry, Princeton James L. Pierce, California, Berkeley Otto Eckstein, Harvard Nathan Rosenberg, Stanford Walter D. Fisher, Northwestern James Simler,Minnesota J. C. LaForce, California, LosAngeles James Tobin, Yale Paul McCracken, Michigan WilliamS. Vickrey, Columbia Daniel McFadden, Massachusetts Institute DudleyWallace, Duke ofTechnology Burton A. Weisbrod, Wisconsin Almarin Phillips, Pennsylvania Arnold Zellner, Chicago Directors by AppointmentofOther Organizations Carl F. Christ, American Economic Rudolph A. Oswald, American Association Federation ofLaborand Congress of Gilbert Heebner, NationalAssociation Industrial Organizations ofBusiness Economists Joel Popkin, AmericanStatistical Robert C. Holland, Committeefor Association Economic Development G. Edward Schuh, AmericanAgricultural Stephan F. Kaliski, Canadian Economics Economics Association Association Albert Sommers, The Conference Douglass C. North, Economic History Board Association CharlesA. Walworth, American Institute ofCertifiedPublicAccountants Directors Emeriti Arthur F. Burns Thomas D. Flynn Murray Shields Emilio G. Collado Gottfried Haberler Boris Shishkin Solomon Fabricant AlbertJ. Hettinger, Jr. Willard L. Thorp Frank Fetter George B. Roberts Theodore O. Yntema Relation ofthe Directors to the Work and Publications ofthe National Bureau ofEconomic Research 1. TheobjectoftheNationalBureauofEconomicResearchistoascertainandtopresent tothepublicimportanteconomicfactsandtheirinterpretationinascientificandimpartial manner.TheBoardofDirectorsischargedwiththeresponsibilityofensuringthatthework ofthe National Bureauis carried onin strictconformitywith this object. 2. ThePresidentoftheNationalBureaushallsubmittotheBoardofDirectors,ortoits Executive Committee, for their formal adoption allspecificproposalsfor research to be instituted. 3. NoresearchreportshallbepublishedbytheNationalBureauuntilthePresidenthas senteachmemberoftheBoardanoticethatamanuscriptisrecommendedforpublication and that in the President's opinion it is suitable for publication in accordance with the principlesoftheNationalBureau.Suchnotificationwillincludeanabstractorsummaryof themanuscript'scontentandaresponseformforusebythoseDirectorswhodesireacopyof themanuscriptforreview. Eachmanuscriptshallcontainasummarydrawingattentionto the nature and treatment of the problem studied, the character of the data and their utilization in the report, and the main conclusions reached. 4. For each manuscript so submitted, a special committee ofthe Directors (including Directors Emeriti) shall be appointed by majority agreement ofthe President and Vice Presidents(orbytheExecutiveCommitteeincaseofinabilitytodecideonthepartofthe PresidentandVicePresidents),consistingofthreeDirectorsselectedasnearlyasmaybe onefromeachgeneraldivisionoftheBoard.Thenamesofthespecialmanuscriptcommit teeshallbestatedtoeachDirectorwhennoticeoftheproposedpublicationissubmittedto him. Itshallbethedutyofeachmemberofthespecialmanuscriptcommitteetoreadthe manuscript.Ifeachmemberofthemanuscriptcommitteesignifieshisapprovalwithinthirty daysofthetransmittalofthemanuscript,thereportmaybepublished.Ifattheendofthat periodanymemberofthemanuscriptcommitteewithholdshisapproval,thePresidentshall thennotifyeachmemberoftheBoard,requestingapprovalordisapprovalofpublication, andthirtydaysadditionalshallbegrantedforthispurpose.Themanuscriptshallthennotbe publishedunlessatleastamajorityoftheentireBoardwhoshallhavevotedontheproposal within the time fixed for the receipt ofvotes shallhave approved. 5. No manuscript maybe published, though approved byeach memberofthe special manuscriptcommittee,untilforty-fivedayshaveelapsedfromthetransmittalofthereport inmanuscriptform.Theintervalisallowedforthereceiptofanymemorandumofdissentor reservation, togetherwithabriefstatementofhisreasons, thatanymembermaywishto express; and such memorandum of dissent or reservation shall be published with the manuscriptifhesodesires. Publicationdoesnot,however,implythateachmemberofthe Boardhasreadthemanuscript,orthateithermembersoftheBoardingeneralorthespecial committee have passedon its validityin everydetail. 6. PublicationsoftheNationalBureauissuedforinformationalpurposesconcerningthe workoftheBureauanditsstaff,orissuedtoinformthepublicofactivitiesofBureaustaff, andvolumesissuedasaresultofvariousconferencesinvolvingtheNationalBureaushall containaspecificdisclaimernotingthatsuchpublicationhasnotpassedthroughthenormal reviewprocedures required in this resolution. TheExecutive Committeeofthe Boardis chargedwithreviewofallsuchpublicationsfromtimetotimetoensurethattheydonottake onthecharacterofformalresearchreportsoftheNationalBureau,requiringformalBoard approval. 7. UnlessotherwisedeterminedbytheBoardorexemptedbythetermsofparagraph6,a copyofthis resolution shall be printed in each National Bureaupublication. (Resolution adopted25 October1926, as revisedthrough30September1974) Contents Acknowledgments Xl 1. Introduction 1 Zvi Griliches 2. Who Does R&D and Who Patents? 21 John Bound, Clint Cummins, Zvi Griliches, Bronwyn H. Hall, and Adam Jaffe 3. Patents and R&D at the Firm Level: A First Look 55 Ariel Pakes and Zvi Griliches 4. The Rate ofObsolescence ofPatents, Research Gestation Lags, and the Private Rate ofReturn to Research Resources 73 Ariel Pakes and Mark Schankerman 5. International Invention: Implications for Technology Market Analysis 89 Robert E. Evenson Comment: Frederic M. Scherer 6. R&D and Innovation: Some Empirical Findings 127 Edwin Mansfield Comments: Zvi Griliches George C. Eads Reply: Edwin Mansfield vii viii Contents 7. Long-Run Trends in Patenting 155 John J. Beggs Comment: Mark Schankerman 8. Tests ofa Schumpeterian Model ofR&D and Market Structure 175 Richard C. Levin and Peter C. Reiss Comment: Pankaj Tandon 9. An Exploration into the Determinants of Research Intensity 209 Ariel Pakes and Mark Schankerman 10. Firm versus Industry Variability in R&D Intensity 233 John T. Scott Comment: Albert N. Link 11. Market Value, R&D, and Patents 249 Zvi Griliches 12. Patents, R&D, and the Stock Market Rate of Return: A Summary ofSome Empirical Results 253 Ariel Pakes 13. R&D and the Market Value ofthe Firm: A Note 261 Andrew B. Abel 14. An Extended Accelerator Model ofR&D and Physical Investment 271 Jacques Mairesse and Alan K. Siu Comment: John J. Beggs 15. The R&D and Investment Decision and Its Relationship to the Firm's Market Value: Some Preliminary Results 299 Uri Ben-Zion Comment: Robert E. Evenson 16. Investment in R&D, Costs ofAdjustment, and Expectations 315 Mark Schankerman and M. Ishaq Nadiri ix Contents 17. Productivity and R&D at the Firm Level 339 Zvi Griliches and Jacques Mairesse 18. Productivity and R&D at the Firm Level in French Manufacturing 375 Philippe Cuneo and Jacques Mairesse 19. Productivity Growth and R&D at the Business Level: Results from the PIMS Data Base 393 Kim B. Clark and Zvi Griliches 20. Using Linked Patent and R&D Data to Measure Interindustry Technology Flows 417 Frederic M. Scherer Comment: Edwin Mansfield 21. R&D and Productivity Growth at the Industry Level: Is There Still a Relationship? 465 Zvi Griliches and Frank Lichtenberg Comment: Nestor E. Terleckyj List ofContributors 503 Author Index 505 Subject Index 509