People go to school and firms do R&D. These activities result in human capital accumulation and new ideas and technologies which make economies grow. I try to capture the interaction between R&D and economic growth by allowing for endogenous research and development in an economy where the number of products and technologies expands because profit maximizing entrepreneurs do R&D, and test this theory byreal practice of China. I find that, in the absence of scale effects, long rungrowth is determined by the capacity to accumulate human capital. Arelative lack of R&D capital causes the economy to grow slowly duringits transition to the steady state, while a relative abundance of R&Dcapital gives high growth rates during transition.