Firm growth and R&D investment: SVAR evidence from the world’s top R&D investors

Alex Coad, Nicola Grassano

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Understanding causal relationships among key economic variables is crucial for policy makers, who wish to e.g. stimulate private R&D growth. To this end, we applied a technique recently imported from the Machine Learning community (Structural Vector Autoregressions (SVARs) identified using Independent Components Analysis (ICA)) to a data-set of the world’s largest R&D investors. Our analysis highlights the key role of firm growth in the areas of employment and sales, rather than growth of profits or market capitalization, in stimulating R&D growth. R&D growth appears toward the end of the causal ordering of the growth process. Our results suggest that policies to increase private R&D would do better to target growth of sales and employment rather than market capitalization or profits.

Original languageEnglish
Pages (from-to)508-533
Number of pages26
JournalIndustry and Innovation
Volume26
Issue number5
DOIs
Publication statusPublished - 2019 May 28
Externally publishedYes

Keywords

  • firm growth
  • market capitalization
  • R&D investment
  • sales growth
  • SVAR

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Management of Technology and Innovation

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