The impact of R&D incentives and sectoral knowledge stocks on R&D outcomes

Given the importance of technological improvement for economic growth, policies are designed to enhance technological progress. A very common policy approach is to provide incentives to R & D (research and development) activities to improve the possibility of favorable outcomes. This study investigates the impact of R & D incentives on R & D outcomes measured in terms of patent applications and patent grants. The analysis focuses on the data for four sectors from 15 high-income countries covering the 2007 to 2019 period. A U-shaped pattern is observed to dominate the relationship between R & D incentives and R & D outcomes. For incentives to have positive impacts on R & D outcomes, they must be of a considerable portion of the national income. The study also covers the knowledge stocks and the implied spill-overs across sectors. The analysis does not reveal a single sector that generates innovative spill-overs to all the other sectors.