The Effects of Internal R&D Expenditures and Intermediate - Capital Imports on Productivity and Value Added in Iranian Provincial Industries

The gap in industrial indices among the provinces of the country and their unbalanced trend of economic growth and development requires, more than ever, considering the abilities and potentials of each region. Accordingly, research and development and intermediate – capital imports lead to the harmonious and dynamic growth of all regions and increase their industries’ competitive ability through technology improvement. Thus, this study investigated the effect of internal R&D expenditures and capital-intermediate imports on the productivity of Iranian industries over the period 1995-2008. For this purpose, total factor productivity function and production function were estimated by applying panel data approach. The results indicated that internal R&D expenditures and capital-intermediate imports had a significant positive effect on the productivity and value added of Iranian industries during the mentioned period. Therefore, the research recommends that the government support R&D efforts of industries in order to improve their technology and production methods and provide their access to modern technologies of the world through import.