R & D, Knowledge, and Externalities: An Approach to the Puzzle of Disparate Productivity Growth Rates Among Manufacturing Industries

Abstract

In several other papers I have commented upon the considerable dispersion in rates of productivity growth across manufacturing industries. Without question these differences are due largely to differences in the pace of technological progress, which in turn reflect disparities in R & D spending and in the effectiveness of R & D. The question addressed in this paper is this: What explains these variations in R & D inputs and effectiveness?²

This paper is part of a larger endeavour to develop an evolutionary theory of firm behaviour undertaken jointly with Sidney Winter. I am indebted to him, to the members of Yale’s Micro Economic Workshop, and especially to Richard Levin, for helpful comments on an earlier draft.