Ever since the 1960s, research and development (R&D) investment has been regarded as an important factor in the improvement of productivity levels. Numerous studies have attempted to estimate the marginal product of R&D capital or the rates of return on R&D investment, but they have continually failed to produce consistent results, with some even failing to determine the contribution of R&D to productivity growth. This chapter investigates productivity growth and R&D expenditure in Taiwan's manufacturing sector, focusing on the relationship between output (value added), employment, physical capital, and R&D capital using panel data for a sample of 136 firms over the period 1994–2000. It assesses the degree to which R&D influences productivity, examines the rates of return on R&D investment within manufacturing firms, and analyzes the differences in productivity growth and the rates of return on R&D investment between industries. Finally, the chapter tests the Schumpeterian hypothesis stating that the returns on R&D are an increasing function of firm size.
Keywords: research and development; Taiwan; productivity growth; output; employment; physical capital; Schumpeterian hypothesis; rates of return; manufacturing firms; R&D expenditure
Chapter. 8677 words.
Subjects: Business and Management
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