  This paper investigates the relationship between private and public
investment in R&D, while taking into account the effect of several instruments
policies such as subsidies and taxes. We design a new look of knowledge
spillovers and R&D cooperation to explain the contribution of public and
private R&D on growth. We propose a heterogeneous dynamic panel data model to
consider the endogenous effect of R&D investment. We also distinguish between
the estimated long and short run results. Our results based on a sample of 23
countries over the period 1992-2004 indicate that both public and private
investments in R&D are complementary. By establishing an endogenous growth
model, the estimates indicate that public and private R&D depends on the host
country's human capital investment. Results indicate that foreign direct
investment is a more significant spillover channel than imports.
