Accumulation of R&D Capital and Dynamic Firm Performance: a Not-so-Fixed Effect Model

  • Tor Jakob Klette
  • Frode Johansen


Considering the observed patterns of R&D investment, we argue that a model which allows for a positive feedback from already acquired knowledge to the productiveness of current research, fits the empirical evidence better than the standard model that treats knowledge accumulation symmetrically with the accumulation of physical capital. We present an econometric framework consistent with a positive feedback in the accumulation of R&D capital. The empirical model is econometrically simple and less data-demanding than the standard framework. Our estimates show a significant positive effect of R&D on performance and a positive feedback effect from the stock of knowledge capital. We calculate the depreciation rate and the rate of return to knowledge capital for our alternative framework, and compare our estimated rates of return to results obtained within the standard framework.


Capital Stock Physical Capital Foreign Ownership Depreciation Rate Private Rate 
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Copyright information

© Springer Science+Business Media Dordrecht 2000

Authors and Affiliations

  • Tor Jakob Klette
    • 1
    • 2
  • Frode Johansen
    • 3
  1. 1.University of OsloNorway
  2. 2.Norwegian School of EconomicsStatistics NorwayNorway
  3. 3.Statistics NorwayNorway

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