Why Some R&D Organizations Are More Productive Than Others

OVERVIEW:Highly productive firms use their capital, labor and material resources more effectively to create product values than do less productive firms. A measure of this effectiveness is “total factor productivity” (TFP). Studies have shown that gains in the TFP of individual firms are directly related to the intensity of their investment in R&D, primarily to investments for product and process development. R&D expenditures for basic research also contribute to productivity growth, but their contribution is indirect, enhancing the gains realized through product and process development. On the other hand, a firm's R&D expenditures for technical service may have a negative impact on its productivity growth. Other factors such as the complexity of the R&D organization, and technology planning practices also appear to influence the productivity growth of firms.