In a more long-term perspective, productivity growth has slowed down in many countries around the world in the recent two decades. Given the fact that many studies have shown that innovation is a key driver of productivity and economic growth, this might point towards decreasing returns to innovation and a depletable technology potential. New ideas can only be realized with more innovation effort and if successful innovations are associated with smaller productivity gains (Bloom et al. 2017). Increasing costs and decreasing benefits both lead to lower long-term profits from investing in innovation and as a result less firms would invest in innovation (Peters et al. 2017). Recent results based on the Mannheim Innovation Panel (MIP) corroborate a decreasing trend in the proportion of innovating firms in Germany. In contrast, another stream of the literature argues that the productivity slowdown is a temporary phenomenon. In particular, digital technologies and their huge potential for far reaching changes in production, often labelled as industry 4.0., will show up in increasing future productivity gains (Brynjolfsson and McAfee 2014). In addition to these two central hypotheses, the literature puts forward additional explanations for the productivity slowdown like a lower and slow diffusion of innovation in the economy, structural change (with increasing income, demand is shifted towards services where returns to R&D and innovation are supposed to be smaller), lack of IT-related skills and qualifications and measurement errors.
The project (i) summarized the empirical evidence on the role of R&D, innovation and digitalization for the productivity slowdown, (ii) depicted the long-term productivity development in Germany, UK, France, Sweden, Switzerland, US, Japan, China and South Korea and (iii) investigated the role of innovation and other main drivers for the productivity evolution in these nine countries.

Selected Publications