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UK has transited from a situation of technology subsidy
in the 1980s to the profit-driven best and fair technology
environment in the 1990s. But the question is which has
been more significant in terms of long-run influence on
the productivity and competitiveness of the UK manufacturing
industries. This paper attempts to find the structural differences
in UK manufacturing industries during 1970-2005 within the
Cobb-Douglas production function framework with R&D
as one of the factors. The empirical investigations in the
paper confirm the short-run structural impact, and non-significant
long-run effects on productivity and competitiveness of
the technology policies.
The so-called `supply-side' revolution in the UK, that
began in the 1980s, brought with it many changes in economic
policy in the UK. None of these was in favor of technical
change. Earlier technology policy mainly subsidized large
companies' Research and Development (R&D) spending.
This was replaced by lower subsidies and the provision of
best-practice international technology information to allow
companies, if they assessed it to be potentially profitable,
to be at the frontier. Along with this important effect
on the technological environment of the companies, the speed
of technical change itself may have accelerated in the 1990s
by the increasing use of computers, the so-called `new economy'.
Has either or both of these had a significant long-run
influence on UK productivity or competitiveness? This paper
addresses this question by looking at the effects of R&D
spending on the efficiency of manufacturing industry over
three decades up to the recent past. Arguably, sufficient
time has now elapsed since the beginning of their implementation
to enable an assessment of the supply-side effects. Relatively
little time has passed since the beginning of the new economy,
but its possible effect on productivity must also be considered
because of its potential importance.
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