R&D specialization and manufacturing productivity growth: A cross-country study

•We examine the R&D specialization-productivity growth nexus across countries.•Various measures of R&D specialization are constructed.•R&D specialization tends to promote productivity growth.•More R&D on development-oriented industry creates higher productivity growth.•R&D specialization on process innovation-oriented industries helps productivity growth.

This study examines how R&D specialization within the manufacturing sector affects productivity growth, constructing various measures of R&D specialization using a concentration index and industrial classification. Based on 11 member countries of the Organization for Economic Co-operation and Development (OECD) for the period from 1981 to 2000, the results obtained based on the fixed-effect panel data model with cross-sectional dependence indicate that concentrating suitable R&D resources within a few industries tends to promote productivity growth. Moreover, this positive effect is relevant to concentrating on development-oriented industries or process innovation-oriented industries.