Technological innovation plays a role in increasing energy productivity and supporting economic growth over time. While the literature has established a link between research and development (R&D) investment and productivity, there is comparatively little research on the institutional sources of energy innovation and their effects on specific sectors. Most existing studies focus on total innovation expenditures and do not distinguish between public research, development, and demonstration (RD&D) investments, nor do they systematically assess sector-specific productivity outcomes.
This study investigates the relationship between public RD&D investment and productivity growth using a cross-country panel dataset covering multiple industries. The analysis utilizes RD&D data from the International Energy Agency (IEA) and sectoral value-added data classified according to the International Standard Industrial Classification (ISIC). The empirical methodology applies fixed-effects panel regressions with country and year controls to estimate the association between public RD&D expenditure and sectoral productivity growth. The primary focus is on the manufacturing sector, with additional analyses for other energy-related sectors.
The results show that the relationship between public RD&D investment and productivity growth is heterogeneous across sectors and time periods. In a number of model specifications, lagged public RD&D investment is associated with statistically significant changes in productivity growth, suggesting that the effects of such investment may be delayed. These findings indicate that public-sector innovation investments have varying impacts on technological progress and productivity depending on the context.
By distinguishing RD&D from aggregate innovation expenditures and linking it to sector-level productivity growth, this study contributes to the literature on the effects of government-led energy innovation policies on economic outcomes. The findings may inform policymakers in the design of innovation strategies intended to increase energy productivity and support economic development.