An unusually rich data set was tapped to explore the relationship between research and development (R and D) and productivity growth. The most-important finding is that, with disaggregated data, the wrong lag hypothesis is not supported: there is no clear indication that the productivity slump of the 1970s resulted from a decrease in the marginal productivity of R and D. Also important is the evidence of substantial returns to used R and D, i.e., from internal-process work and the purchase of R and D-embodying products, but not (at least in industries with productivity indices based upon physical output or comprehensive price deflators) to the performance of product R and D. Given the fact that three-fourths of all industrial R and D is product-oriented, studies that fail to distinguish between the origination and use of R and D may suffer from appreciable specification errors. Further research using improved R and D and (especially) productivity data is plainly needed, among other things, to clarify the mystery of why estimated R and D-productivity relationships differ for productivity-data subsets of varying quality. 15 references, 3 tables.

For a seventeen-year panel covering 308 U.S. manufacturing corporations, we analyze firms' R&D spending reactions to changes in high-technology imports. On average, companies reduced their R&D/sales ratios in the short run as imports rose. Individual company reactions were heterogeneous, especially for multinational firms. Short-run reactions were more aggressive (i.e., tending toward R&D/sales ratio increases), the more concentrated the markets were in which the companies operated, the larger the company was, and the more diversified the firm's sales mix was. Reactions were less aggressive when special trade barriers had been erected or patent protection was strong in the impacted industries. Companies with a top executive officer educated in science or engineering were more likely to increase R&D/sales ratios in response to an import shock, all else equal. Over the full 17-year sample period, reactions may have shifted toward greater average aggressiveness.

Through a survey, private economic value estimates were obtained on 964 inventions made in the United States and Germany and on which German patent renewal fees were paid to full-term expiration in, 1995. A search of subsequent U.S. and German patents yielded counts of citations to those patents. Patents renewed to full-term were significantly more highly cited than patents allowed to expire before their full term. The higher an invention's economic value estimate was, the more the patent was subsequently cited.