It is widely accepted that RD investment improves technological progress. The RD capital that boosts a firm's production efficiency has various sources. This paper uses "effective" RD capital, which represents not only a firm's internal RD input but also the benefit derived from RD collaboration and accessible knowledge capital, to empirically examine its effects on a firm's productivity. Accounting for technological distance and the endogeneity problem of weights matrices, we use spatial panel data models to estimate the return of RD capital within the framework of the production function. We estimate the production function using the firm-year data of Shanghai technological enterprises from 2009 to 2017. The results show positive, significant relationships between each element of "effective" RD capital and total-factor productivity (TFP). Knowledge spillovers have greater impacts on a firm's TFP than its internal RD input and RD collaboration. The contribution of RD collaboration to TFP is less than that of internal RD, indicating that RD collaboration is not fully internalized. The results imply that a better environment for RD collaboration and technology exchange is needed.
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