The Rising Returns to R&D: Ideas Are Not Getting Harder to Find

Despite concerns that “ideas are getting harder to find,” this paper finds that R&D has actually become more productive over the last four decades. Using U.S. Census data from 1976 to 2018, the researchers show that both the elasticity of output and marginal returns to R&D in the manufacturing sector have risen sharply. However, this increase comes alongside rising obsolescence, as firms’ innovations are more frequently displaced by rivals. The study highlights a growing tension in industrial research—greater productivity at the firm level, but with shorter-lived innovations.