Economics of investment in RandD and innovation.

Research and development is a critical long-run determinant of productivity of any country, but the main question is how much to invest in RandD and the answer only depends on the returns attached to it in the form of growth and development. Solow in 1956 asserted that sustained technological progress is essential to drive economic growth while the contribution of technology development to growth in the majority of economies is highlighted by new economic growth theories as well so, technological advancement via RandD has recently been a significant driver of individual business success and, as a result, the expansion of the economy. The acquisition of technology can be through innovation or imitation where the imitating country lacks the capability to produce its invention or the availability of capital stock for invention is limited.

The high cost of inventing a new idea, process, or procedure can make innovation wasteful, especially in a situation where there is inadequate infrastructure and/or technologists. This makes it impossible for some economies (especially developing countries) to undertake high-cost inventions rather they may prefer to copy when such innovation is available to them. The question of copying an existing technology or becoming a pioneer of new technology will depend on the technological gap between the countries. Theories suggest that copying is beneficial if the technological gap between the imitator and the leader is long while detrimental if the gap is small. However, issues like competitiveness in high-value-added goods, difficulties of cost competition in emerging economies, quality of products, and the desire to change the growth pattern favor an active and huge investment in RandD generation.

As most developing countries like Pakistan specialize in Agriculture so, achieving the goal of poverty reduction plus an increase in agricultural productivity is attainable with investment in agricultural research as an increase in income per capita occurs due to productivity growth in agriculture which significantly helps to lower poverty. Many researchers concluded with the fact that agricultural research has an aggregate rate of return of 55 %, and this helps to reduce the percentage or number of people suffering from poverty by 0.8 % or 2.3 million annually. Although environmental degradation and population growth issues lower the actual effect, researchers still stress that the potential effects of agricultural...