Publication
Understanding the growth and productivity impacts of persistent ‘v’ intermittent R&D and innovation engagement
Published: 2 November 2026
ERC SOTA No 72
Associated Themes
-
Business Growth -
Entrepreneurship -
Innovation -
Productivity and performance
This review draws on international research to examine whether firms that invest in research and development (R&D) and innovation consistently perform better than firms that do so only occasionally.
The review is based on the idea that steady investment in developing knowledge and creating new products and processes can help firms build skills, strengthen their position against competitors, and improve productivity over time. But persistent R&D may also carry risks: firms could become too focused on one approach and remain tied to technologies that are no longer up to date. Which effect is stronger?
Overall, international research points to a “persistence premium”: firms that consistently invest in R&D and innovation tend to perform better. However, the size and reliability of this advantage vary across studies. Firms that conduct R&D regularly generally have higher productivity and faster productivity growth than those with occasional or no R&D. Evidence linking regular R&D to firms’ sales or employment growth is less consistent.
Research also suggests that firms that innovate regularly tend to outperform those that innovate only occasionally across productivity, profitability, and employment growth, and sometimes in sales growth. The results vary by type of innovation: regular efforts to develop new products often yield greater performance benefits than ongoing efforts to improve production processes.
It is difficult to draw firm conclusions from international research because studies define and measure persistence in different ways, making direct comparisons challenging. The size of the advantage also appears to depend on firm characteristics, including size and growth patterns. Some evidence suggests the effects may be stronger for small and medium-sized enterprises (SMEs). The research is drawn mainly from Spain, Italy, Sweden, and other countries; robust evidence from the UK remains limited and dated.
For policymakers, the findings suggest that sustained investment in R&D and innovation may yield higher economic returns than one-off or sporadic efforts. However, the limited UK evidence and the possible role of public support in encouraging firms to persist point to a need for further research. This could use linked, long-term data on UK firms to better understand how sustained innovation affects growth and productivity.
Downloads
