R&D and the Growth of Business Enterprises The contribution of R&D to the performance measure (profits ,sales) statistically to R&D expenditures –in the current and previous periods to allow for the delayed effect of R&D on business performance –and by controlling for the effect of other investments (physical assets ) on business performance. This statistical approach to empirically address issues concerning intangibles and their private and social impact was frequently used by economists and researchers in related areas. The empirical worked started with extensive historical case studies and proceeded to large sample (cross-sectional) analyses of R&D on firms’ productivity and growth .The research effort yielded several important findings: ---R&D expenditures contribute significantly to the productivity(value added) and output of firms ,and the estimated rates of return on R&D investment are quite high —as much as—20-35 percent annually – with the estimates varying widely across industries and over time. --- The contribution of basic research (work aimed at developing new science and technology) to corporate productivity and growth is substantially larger than the contribution of other types of R&D ,such as product development and process R&D(where the latter is aimed at enhancing the efficiency of production processes).The estimated contribution differential of approximately three to one in favor of basic research is particularly intriguing ,given the widespread belief that panies have been recently curtailing expenditures on basic research, in part as a response to the skepticism of many financial analysts and institutional investors about mercialization prospects of basic research. Basic research is, of course, more risky than applied R&D (see chapter 2), but it is inconceivable that risk differentials by themselves account for a three-to-one productivity of basic research. ---The contribution of corporate-financed R&D to productivity growth is larger than
