R&D spillovers in a supply chain and productivity performance in British firms

It is well known that there are incentives for cooperation and collaboration along the supply chain, as the performance of any one firm is dependent on that of its suppliers. However, R&D by any firm or sector may affect the performance of other firms and sectors that it supplies irrespective of whether collaboration takes place or not, as reflected in endogenous growth models where positive spillovers play a major role. This paper studies the impact of R&D spillovers on productivity performance in British firms, focusing on spillovers in a supply chain. The results show that R&D spillovers along the supply chain has the largest positive and most significant impact on labour productivity, followed by own-sector spillovers, then by own-internal R&D and own purchases of external R&D. Moreover, R&D spillovers tend to stimulate firms’ R&D and innovation spending and these, in turn, increase labour productivity.