R and D and absorptive capacity: Theory and empirical evidence

Rachel Griffith, Stephen Redding, John Van Reenen

Research output: Contribution to journalArticlepeer-review

271 Scopus citations


This paper presents a single unified framework that integrates the theoretical literature on Schumpeterian endogenous growth and major strands of the empirical literature on R&D, productivity growth and productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992, 1998), we provide microeconomic foundations for the reduced-form equations for total factor productivity (TFP) growth frequently estimated empirically using industry-level data. R&D affects both innovation and the assimilation of others' discoveries ("absorptive capacity"). Long-run cross-country differences in productivity emerge endogenously, and the analysis implies that many existing studies underestimate R&D's social rate of return by neglecting absorptive capacity.

Original languageEnglish (US)
Pages (from-to)99-118
Number of pages20
JournalScandinavian Journal of Economics
Issue number1
StatePublished - 2003
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


  • Absorptive capacity
  • Endogenous growth
  • R and D
  • Total factor productivity (TFP)


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