Technological Change and R&D Activities as a Factor of Economic Growth

Abstract

The aim of this thesis is to concurrently evaluate the significance of technological change as an ultimate driver of productivity performance and economic growth, while also examining the role of research and development (R&D) investments in economic growth. The most important question in my thesis is: what creates growth? Factors for this creation could be various, but special attention is paid to firm performance and its changes over the firm size distribution. Measuring productivity growth and R&D performance is important as accurate estimation of R&D investment would help a firm to optimize its R&D spending and avoid unproductive expenditures. Moreover, R&D investment depends on a firm’s technological opportunities and expected profitability. In the empirical part, I examine firm growth rates in Finland. The results show the significant positive impact of R&D on growth. I found that the growth impact varies with firm size, showing a positive relationship for small and medium-sized firms but a negative relationship for large firms. Additionally, I observe positive autocorrelation for all types of firms.