Journal of Productivity Analysis

, Volume 36, Issue 2, pp 125–142 | Cite as

The R&D and productivity relationship of Korean listed firms

  • Almas Heshmati
  • Hyesung Kim


This study analyzes the relationship between R&D investment and the productivity of Korean R&D-engaged firms. An interdependent chain of equations including the propensity to invest, R&D investment and productivity are estimated in a multi-step procedure accounting for selectivity and simultaneity biases. Using Korean firm level panel data of listed firms from 1986 to 2002, we find four main empirical results. First, there is a two-way causal relationship between R&D investment and productivity for Korean listed firms. Second, Chaebol firms were associated with lower R&D growth as well as lower labor productivity growth in comparison to non-Chaebol firms. Third, there was a substantial reduction in growth rates both in R&D investment and labor productivity in 1997-1998, immediately following the Asian financial crisis. Fourth, considering the positive feedback effect from productivity growth to R&D growth, a decrease in R&D investment growth after the Asian financial crisis should have been harmful by further decreasing productivity growth.


R&D investment Productivity Selectivity Chaebol Simultaneity Asian financial crisis 

JEL classification

C33 E22 L60 O32 



The authors would like to thank the Associate Editor of the journal and an anonymous referee for their very useful comments and suggestions on two earlier versions of this paper.


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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Department of Food and Resource Economics, College of Life Sciences and BiotechnologyKorea UniversitySeoulKorea
  2. 2.Department of Political ScienceUniversity of RochesterRochesterUSA

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