Return to the business R&D expenditures in the Netherlands

Abstract

The main goal of the study is to evaluate the rate of return to R&D expenditures carried out by private enterprise in the Netherlands based on sectoral and microeconomic datasets. We have applied the production function approach common in the literature to econometrically estimate the rate of return and differentiate the rate of return between government and private financing of R&D expenditures at the firm level. Another goal was to examine the multiplier effect of government R&D financing. The study concluded that one euro spent on R&D returned, on average, at least 2.3 euro over the lifetime of investment, including 1.6 euro in the sector where the R&D was carried out and an extra 0.7 euro via the purchasing of investment goods (machinery and software), with time lags of one to two years before the first positive annual return to the investment. Return to privately-financed R&D are higher than to government-financed. There is a multiplier effect of the public financing on private expenditures, with the elasticity between 0.05 and 0.1