R&D,Human Capital Investment and Productivity:Firm-level Evidence from China's Electronics Industry

Using firm-level panel data covering 2005-2007,the present paper examines the effects ofR&D and human capital investment on productivity in China’s electronics industry.It isfound that both R&D and on-the-job training positively contribute to total factor productivity(TFP).Firms’ investment in employees’ health insurance andpensions,which are componentsof workers’ compensation,generate a productivity-enhancing effect,supporting the efficiencywage hypothesis.The estimated impact of R&D on productivity varies among differentforms of ownership,and foreign-owned enterprises experience higher R&D efficiency thanstate or private enterprises.After controlling for potential endogenous causality betweenTFP and R&D,the above findings remain unchanged We also find that on-the-job trainingcan improve the quality of human capital and is helpful in promoting productivity.Therefore,establishing indigenous technological capability through various technological sources isquite important,and the government should devote further effort to investing in humancapital.