Effectiveness of R&D expenditures supporting innovation: A case study of OECD countries

Abstract

R&D expenditures have been proven to be a key determinant of innovation activities in all developed countries. These are primarily private sources of in-house research, intramural government expenditure on R&D, research and development spending by universities and the public sector (e.g., public laboratories and research institutes). These expenditures are often part of public policies whose proper targeting and management should lead to allocation efficiency and optimal use of available production resources and funding. This paper aims to analyze the effectiveness of these resources used to support R&D activities in 36 OECD countries. We have used the available data from the OECD databases for 2014 and employed the DEA (VRS model) method. The output variable was % share of innovative firms and the GDP of the economy. The results confirm that the efficiency of allocated resources is considerably variable. Only a handful of countries have achieved maximum efficiency in the analyzed period (Estonia, Belgium, Ireland, Chile, South Korea, Mexico, and New Zealand). At the end of the paper, the results were discussed and practical recommendations defined.