This paper provides evidence that rising misallocation in the R&D sector con- tributed to the recent slowdown in U.S. productivity growth. I develop a growth accounting framework allowing for misallocation of R&D resources across firms cap- tured by wedges between their marginal costs and benefits of R&D. I show that R&D wedges can be measured from R&D returns and document large and persistent differ- ences in R&D returns across U.S.-listed firms. Combining data and model, I estimate that frictions reduced productivity growth by 11% over 1975–2014 and that rising misallocation in the R&D sector accounts for 32% of the growth slowdown.