TY - JOUR
T1 - Firm growth and R and D expenditure
AU - Coad, Alex
AU - Rao, Rekha
N1 - Funding Information:
We thank Carlo Bianchi, Giulio Bottazzi, Joe DiMasi, Graham Dukes, Davide Fiaschi, Ove Granstrand, Luigi Orsenigo, Katharine Rockett, Mike Scherer, Ulrich Witt, Peter Zweifel, seminar participants at the Universit‘a di Pisa and at the European Science Foundation conference on ‘The Global Organisation of Biomedical Innovation: Funding, Intellectual Property Rights, Incentives and the Diffusion of New Technology’ in Kiel, 2007, as well as the editor (Cristiano Antonelli) and two anonymous referees for many helpful comments. Zlata Jakubovic provided careful research assistance. The usual caveat applies.
PY - 2010/3
Y1 - 2010/3
N2 - We apply a panel vector autoregression model to a firm-level longitudinal database to observe the co-evolution of sales growth, employment growth, profits growth and the growth of research and development (R&D) expenditure. Contrary to expectations, profit growth seems to have little detectable association with subsequent R&D investment. Instead, firms appear to increase their total R&D expenditure following growth in sales and employment. In a sense, firms behave 'as if' they aim for a roughly constant ratio of R&D to employment (or sales). We observe heterogeneous effects for growing or shrinking firms, however, suggesting that firms are less willing to reduce their R&D levels following a negative growth shock than they are willing to increase R&D after a positive shock.
AB - We apply a panel vector autoregression model to a firm-level longitudinal database to observe the co-evolution of sales growth, employment growth, profits growth and the growth of research and development (R&D) expenditure. Contrary to expectations, profit growth seems to have little detectable association with subsequent R&D investment. Instead, firms appear to increase their total R&D expenditure following growth in sales and employment. In a sense, firms behave 'as if' they aim for a roughly constant ratio of R&D to employment (or sales). We observe heterogeneous effects for growing or shrinking firms, however, suggesting that firms are less willing to reduce their R&D levels following a negative growth shock than they are willing to increase R&D after a positive shock.
KW - Firm growth
KW - Industrial dynamics
KW - Panel VAR
KW - R&D expenditure
UR - http://www.scopus.com/inward/record.url?scp=77649155834&partnerID=8YFLogxK
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U2 - 10.1080/10438590802472531
DO - 10.1080/10438590802472531
M3 - Article
AN - SCOPUS:77649155834
VL - 19
SP - 127
EP - 145
JO - Economics of Innovation and New Technology
JF - Economics of Innovation and New Technology
SN - 1043-8599
IS - 2
ER -
