Beyond the R&D effects on innovation: the contribution of non-R&D activities to TFP growth in the EU

A significant part of the innovation efforts carried out across very heterogeneous economies in Europe is under the form of Non-R&D innovation activities. But the traditional macro approach to the determinants of TFP does not handle this issue appropiately. This paper has proposed and estimated an augmented macro-theoretical model to the determinants of total factor productivity (TFP) by jointly considering the effects of R&D endowments and the impact of Non-R&D innovation activities on …firms´ levels of productivity. The estimation of the model for a sample of EU26 countries covering the period 2004-2008 shows that the distinction between R&D and Non-R&D endowments really matters for a number of different issues. First, the results show a sizable differential impact of these endowments on TFP growth, being the impact of R&D twice as big as the impact of Non-R&D. Second, absorptive capacity is only linked to R&D endowments. And third, the two types of endowments cannot strictly been seen as complements at least for the case of countries with high R&D intensities or high Non-R&D intensities.