Innovation Networks and R&D Allocation / Ernest Liu, Song Ma.

Format:

Book

Author/Creator:

Liu, Ernest.

Contributor:

National Bureau of Economic Research.

Ma, Song.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29607.

NBER working paper series no. w29607

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

We study the cross-sector allocation of R&D resources in a multisector growth model with an innovation network, where one sector's past innovations may benefit other sectors' future innovations. Theoretically, we solve for the optimal allocation of R&D resources. We show a planner valuing long-term growth should allocate more R&D toward central sectors in the innovation network, but the incentive is muted in open economies that benefit more from foreign knowledge spillovers. We derive sufficient statistics for evaluating the welfare gains from improving R&D allocation. Empirically, we build the global innovation network based on patent citations and establish its empirical importance for knowledge spillovers. We evaluate R&D allocative efficiency across countries using model-based sufficient statistics. Japan has the highest allocative efficiency among the advanced economies. For the U.S., improving R&D allocative efficiency to Japan's level could generate more than 19.6% welfare gains.

Notes:

Print version record

December 2021.