R&D effort and knowledge sourcing: the search for better profitability and higher growth

In Europe, investments in internal and external research and development (R&D), innovation, and organizational capabilities significantly impact productivity and profits, particularly during the COVID-19 pandemic. Using GLOBALINTO intangible capital survey on Europe, a focus is placed on those factors that generate growth in productivity and employment. The core element of growth-promoting policies is internal R&D in firms with high business value through innovations. Other important sources of growth are digitalization and organizational agility. External R&D relates to higher productivity but not to growth. Both R&D and intangibles, in general, improve financial allocation rather than resulting in high fixed costs. Sound asset turnover limits the necessity for public intervention, as R&D improves the level of financial allocation efficiency.