![Fact of the Week: For Every 10 Percent Increase in R&D Investment per Employee, Irish Firm Productivity Increases by 12 Percent](https://cdn.sanity.io/images/03hnmfyj/production/86f6dbce913575f90aa48e1748ad619c31e3c06b-4184x630.png)
Fact of the Week: For Every 10 Percent Increase in R&D Investment per Employee, Irish Firm Productivity Increases by 12 Percent
Businesses invest in R&D to develop new products and more efficient processes. Both types of innovation increase productivity: New product releases create greater value from the same level of inputs, and more efficient processes allow firms to produce the same products with fewer inputs.
A recent study quantifies the impact of R&D investments on productivity in Ireland. The authors analyzed data on more than 10,000 Irish firms from 2006 to 2012 and found that for the average firm, a 10 percent increase in R&D investment per employee raised productivity by 12 percent. In fact, they found that R&D investments have a much larger impact on productivity than investments in “traditional” physical capital, such as new machines or factories.