Costs of Production, Intra- and Interindustry R&D Spillovers: Canadian Evidence.

This paper presents estimates of the effects of intra- and interindustry R&D investment spillo vers on the costs and structure of production. The social rates of re turn to R&D investment and their deviation from the private rate are also estimated. Generally a firm's own R&D capital is a substitute fo r R&D capital obtained freely via spillovers. However, for firms oper ating in industries with relatively larger R&D propensities, their ow n R&D capital and the intraindustry spillover are complementary. In a ll industries, the social rate of return greatly exceeds the private return and the contribution of the interindustry spillover to the soc ial return is virtually the same and small for all industries.