An analysis of the paradox in R&D. Insight from a new spatial heterogeneity model

Abstract

The relationship between research and development (R&D) and economic growth is a hot topic. Most research indicates that R&D leads to innovation, which is conducive to economic growth. However, some scholars hold a different opinion, alleging that high R&D investment will not bring high economic growth. This scenario is also known as the Swedish paradox. We develop a new spatial heterogeneity model in the form of a mixed geographically weighted panel regression with spatial Durbin model (MGWPR-SDM). Using this model, we add to the debate over the possible existence of a Swedish paradox in China. The results show that the impact of aggregate R&D expenditure on economic growth follows an inverted U-shaped curve. The Swedish paradox appears after a threshold is reached, mainly due to business enterprise R&D expenditure rather than government R&D investment. However, from the perspective of R&D input per unit GDP, the impact of R&D intensity on economic growth is U-shaped, and the Swedish paradox occurs before the threshold is reached. Finally, the effect of government R&D expenditure and business enterprise R&D expenditure on economic growth has significant spatial heterogeneity.