Studies in other countries have found that investments in Research and Development (R&D) can lead to productivity improvements. Our study quantifies the impact of R&D on productivity at both the overall economy and firm levels in Singapore.

 

At the overall economy level, we find that R&D has a positive and significant correlation with productivity. In particular, between 1978 and 2014, a $1 increase in R&D stock was associated with an increase in multi-factor productivity of $0.28 and $1.01 in the short- and long-run respectively.

 

Similarly, our findings indicate that R&D has a positive and significant impact on productivity at the firm level. Over the period of 2002 to 2013, a $1 increase in R&D stock was found to raise productivity in a firm with a median value-added to R&D stock ratio by $0.35. Dividing this period into sub-periods that coincide with the Research, Innovation and Enterprise (RIE) funding tranches, we find that the dollar impact of R&D has increased over time, from $0.29 in 2002-2005, to $0.37 in 2006-2010, and then to $0.40 in 2011-2013.

 

Our findings thus suggest that continued investments in R&D can help to raise productivity in the years ahead.

  

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