Linking R&D, Innovation and Productivity in Canada, Sector Level Analysis

Abstract

This paper uses a structural three-step estimation process to examine the connectivity between, research and development, innovation, and productivity in Canada, using sector level data from CANSIM. The paper aims to reproduce some of the results found in previous studies on the subject, particularly that of Dany Brouillette (2013), which investigated the relationship above for Canada at the firm-level using a Crépon-Duguet-Mairesse (CDM) model (Crépon et al., 1998). Building a similar model at the sector-level, will allow to investigate whether the positive link between R&D, innovation, and productivity is maintained at aggregated levels. The paper will show that determining this link between R&D, innovation, and productivity at this level of aggregation is a difficult task, and that the relationship between the three is weak at best.