Public research and development
Economists have made significant strides to understand the dynamics of public R&D, along with its cascading effects. Scholars generally propose that public R&D enhances industrial productivity (e.g., Levy and Terleckyj, 1983; Nadiri and Mamuneas, 1994).However, the improvement of productivity could result in R&D spill-over of public sectors, researcher movements and co-operation between public and private sectors. Economists are particularly concerned about whether public R&D stimulates or crowds out the private sector R&D. It is generally known as a 'policy success', if the public R&D (especially the government R&D subsidy) could stimulate the R&D investment of private sectors. So far, there is no conclusive viewpoint in the literature (e.g., Toole, 2007 ;Cohen, Coval, and Malloy, 2011; Azoulay, Zivin, Li, and Sampat, 2018). Public R&D is also positively related to stock returns of industrial firms (Chen, Chen, Liang, and Wang, 2020). Although they show that abnormal returns based on public R&D ratio generate about 0.9% abnormal returns per month, and suggest that the positive relation could be interpreted by increased cash flow risks.
Productivity
Public R&D could be understood as a funder or a performer of an R&D activity.