A time lag analysis of R&D effect on total factor productivity in information and telecommunications industry

Abstract

As Industrial Paradigm rapidly changes into a knowledge-based economy, the importance of research & development (R&D) investments has dramatically increased. The tremendous amounts of investments made to information and telecommunications industry have played a critical role in the current economic growth of Korea. This paper describes and proposes a time lag regression model that can measure the speed at which, R&D investments effect in information and telecommunications industry. This study employs the extended form of Cobb-Douglas production function. In addition, we can also compare information and telecommunications industry with other industries. This paper analyzes the effect of R&D investments in information and telecommunications industry in two ways. First, this paper measures R&D effects on Total Factor Productivity (TFP) in information and telecommunications industry. Second, this paper seeks to determine whether R&D investments in information and telecommunications industry affect TFP faster than in other industries. Hence, in order to preserve economic growth and reinforce competitive advantages, government policies and regulatory framework need to be reshaped so that they minimize the distorted use of limited resources and maximize the efficiency of R&D investments. Using this framework, this paper seeks to investigate the influence of R&D investments in national economic growth. Moreover, the primary objective of the research is to compare the effectiveness of R&D investments in information and telecommunications industry with those of other industries, in accordance with the time lag.