Debt,R&D investment and technological progress: A panel study of Japanese manufacturing firms' behavior during the 1990s

Based on a panel data set of Japanese manufacturing firms in research-intensive industries, we investigate quantitatively the extent to which outstanding debt affected firms' R&D activities during the 1990s. We find that massive amounts of outstanding debt had a significant, negative effect on R&D investment during that time. We also find that R&D expenditures were closely linked to firm-level total factor productivity growth over the same period. In fact, a ten-percentage-point increase in the debt–asset ratio lowered the rate of firm-level total factor productivity growth by 0.26 percentage points between 1999 and 2001, because it reduced R&D activities. J. Japanese Int. Economies 21 (4) (2007) 403–423.     

Strategic R&D Location in European Manufacturing Industries

We empirically test a model of foreign research and development (R&D) investments that takes into account strategic interaction in R&D location decisions by multinational firms in the context of R&D cross-investments, R&D spillovers and foreign technology sourcing strategies. We find support for most of the predictions of the model in an empirical analysis of the location of patented innovations by the largest European manufacturing firms in 22 ISIC industries during 1996–1997. For technology leaders in Europe, foreign R&D ratios respond positively to host country product market competition, while technology laggards avoid these locations. Foreign R&D by technology laggards increases more strongly with the efficiency of (reverse) international technology transfer while leaders are attracted more strongly to countries with better intellectual property rights (IPRs) protection. Foreign R&D of both technology leaders and technology laggards increases with the size of the local knowledge pool and the size of manufacturing operations in the host country. JEL no.  D21, F23, L16     

Self-selection and performance of R&D input of heterogeneous firms: Evidence from China's manufacturing industries

Applying the theories of heterogeneous firms and the propensity score matching difference-in-differences (PSM-DID) method to a rich dataset of Chinese manufacturing firms, this paper examines the self-selection of firm-level R&D input and estimates the net effect of R&D on productivity. The analysis shows that (1) for Chinese manufacturing firms as a whole, R&D input is influenced by firm productivity: more productive firms are more likely to invest in R&D; (2) controlling for the self-selection effect, the net output elasticities of R&D input in one year and two years after R&D input are 3.92% and 5.25%, respectively; (3) although state-owned enterprises (SOEs) are more likely than all other ownership groups to invest in R&D, the R&D input is not productive; (4) although enterprises owned by investors outside of Mainland China are the least likely to invest in R&D, the output elasticity of R&D is more significant and larger in this group than in SOEs and privately owned Chinese firms; and (5) surprisingly, the net effect of R&D is not significant in high-tech industries. Policy implications are derived from the findings.     

Competition and productivity in Japanese manufacturing industries

This paper examines the determinants of productivity in Japanese manufacturing industries, looking particularly at the impact of product market competition on productivity. Using a newly available panel data on around ten thousand firms in Japanese manufacturing for the years 1994–2000, I show that competition, as measured by lower level of industrial price–cost margin, enhances productivity growth, controlling for a broad range of industrial and firm-specific characteristics. Moreover, I suggest that market power, as measured by either individual firm's price–cost margin or market share, has negative impact on productivity level of R & D performing firms. J. Japanese Int. Economies 19 (4) (2005) 586–616.     

R&D and patenting activities of foreign firms in China: The case of Japan

This study investigates the research and development (R&D) and patenting activities of foreign firms in China. Utilizing a panel dataset of Japanese affiliates during the period 2001–2007, we first examine the determinants of R&D activity and find that local market-oriented firms place more emphasis on R&D, whereas process export-oriented firms are less likely to conduct R&D. Affiliates within a large business group that has more affiliates have a higher propensity to undertake R&D. Using only firms with positive R&D expenditures, we next estimate the patent production function. Results indicate that the patent elasticity of R&D for Japanese affiliates is high, suggesting that they are more productive on patent production than other firms. Moreover, local market-oriented firms do need more patents to protect their products, whereas scientific firms demonstrate a lower willingness to register patents in China.     

International capital market integration: Implications for convergence, growth, and welfare

This paper studies the effects of international capital market integration on welfare and the speed of adjustment in a two-region endogenous growth model. Monopolistic firms undertake research and development (R&D) to improve their productivity level. National and international knowledge spillovers affect the returns to R&D. The two countries differ with respect to the initial productivity level and R&D capability (which is a proxy for human capital and structural policies). Long-run productivity gaps are determined by the difference in R&D capability. Over time, there is conditional convergence in productivity levels. The speed of convergence is larger with integrated international capital markets than without. Long-run gaps in consumption levels are larger in the former situation than in the latter. Capital market integration harms (benefits) the leading (lagging) region if domestic spillovers are more important than international spillovers and differences in R&D capabilities are small.The authors research is supported by the Royal Netherlands Academy of Arts and Sciences. He thanks Lucas Bretschger, Theo van de Klundert, and Richard Nahuis, Thomas Steger, and Helmut Wagner for comments on an earlier version.     

Global knowledge flow and Japanese multinational firms’ offshore R&D allocation and innovation

This paper examines whether allocating more research and development (R&D) activities to a country-industry pair with a higher intensity of knowledge flows improves the innovation performance of multinational enterprises (MNEs). We use firm-patent-matched data for Japanese manufacturing MNEs, including data on MNEs’ offshore R&D expenditure and information on patents filed by both parent firms and overseas affiliates. Moreover, as a proxy for the intensity of knowledge flows, we use the eigenvector centrality of each country-industry pair in the global knowledge flow network, utilizing patent citation information.We find that the quality-adjusted number of patent applications tends to be higher for MNEs that allocate more R&D activities to country-industry pairs that are more central in the network of global knowledge flows. However, we did not find any significant relationship between the country and industry distribution of offshore R&D and the number of patent applications.     

Openness and total factor productivity in Swedish manufacturing, 1980–1995

Openness and Total Factor Productivity in Swedish Manufacturing, 1980–1995. — This paper studies the effect of openness on total factor productivity (TFP) growth. Using industry-level data for Swedish manufacturing from 1980 to 1995, the paper shows that integrated industries tend to be more engaged in R&D and have more entry and exit activity than other industries. The results show that domestic R&D intensity does not contribute to the TFP growth rate. Instead, openness to international markets, which helps facilitate technology spillovers, is an important factor. There is also some evidence that producers exiting the market are less productive, implying that such exits will increase the average productivity of the industry.     

R&D,unemployment, and labor market policies

This paper studies the effects of labor market policies on R&D activities and unemployment. I develop a search and matching model in which firms’ R&D decisions are endogenously determined. The model demonstrates that more intensive labor market policies that protect workers reduce the levels of R&D activities. This study offers a theoretical framework to understand the relationship between R&D activities, labor market policies, and unemployment which is discussed in empirical studies.     

R&D subsidies and business R&D: Evidence from high-tech manufacturing firms in Jiangsu

We investigate how R&D subsidies affect business R&D investments using cross-section data of high-tech manufacturing firms in Jiangsu province of China. Our estimations based on propensity score matching suggest that public subsidies positively influence business R&D investments. Further classifying firms into different groups by size, financial constraints, and ownership, we find that the stimulation effect is more significant and stronger for smaller firms, more financially constrained firms, and private-owned firms. The heterogeneity of policy effects with respect to export status, Relative Comparative Advantage index, region, and industry are also discussed.     

Foreign Ownership and Productivity: New Evidence from the Service Sector and the R&D Lab

This paper examines the relationship between foreign ownershipand productivity, paying particular attention to two issuesneglected in the existing literature—the role of multinationalsin service sectors and the importance of R&D activity conductedby foreign multinationals. We review existing theoretical andempirical work, which largely focuses on manufacturing, beforepresenting new evidence using establishment-level data on production,service, and R&D activity for Great Britain. We find thatmultinationals play an important role in service sectors andthat entry of foreign multinationals by takeover is more prevalentthan greenfield investment. We find that British multinationalshave lower levels of labour productivity than foreign multinationals,but the difference is less stark in the service sector thanin the production sector, and that British multinationals havelower levels of investment and intermediate use per employee.We also find that foreign-owned multinationals conduct a substantialamount of British R&D. We discuss the implications of theseand other findings for the policy debate on incentives to influencemultinational firms' location choices.     

R&;D,trade, and productivity growth in korean manufacturing

This paper investigates the effects of both R&D spillovers and trade patterns on productivity in Korean manufacturing, using industry-level data. The results show that domestic and foreign R&D capital stocks played an important R&D in improving the total factor productivity of Korean manufacturing. Moreover, productivity is higher in export industries and the more open industries, and the effects of foreign R&D capital are stronger in the industries with large import shares or large intra-industry trade shares. JEL no. F10, O32, O47.     

Demand forces of technical change evidence from the Chinese manufacturing industry

This paper investigates the effect of domestic market size on innovation activities across different durable good industries in the Chinese manufacturing sector. We address the endogeneity of market size by an IV strategy, based on a measure of potential market size, which is driven only by changes in the Chinese income distribution. This measure is exogenous to changes in prices and qualities of durable goods and is a valid instrument for expected future market size. Our results indicate that an increase in market size by one percent leads to an increase in firm-specific total factor productivity by 0.46% and an increase in labor productivity by 0.50%. These findings are robust to controlling for export behavior of firms and supply side drivers of R&D.     

Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects

This paper uses a proportional hazard model to study foreign direct investment by Japanese manufacturers in Europe between 1970 and 1994. We divide each firm’s investment total into a sequence of individual investment decisions and analyze how firm-specific characteristics affect each decision. We find that total factor productivity is a significant determinant of a firm’s initial and subsequent investments. Parent-firm size does not have a significant influence on the initial decision to invest. Large firms simply have more investments than smaller firms. Other firm-specific characteristics, such as the R&D intensity, export share and keiretsu membership, also play a role in the investment process. JEL no. F23, L20     

Measuring Multinationals' R&D Activities in China on the Basis of a Patent Database: Comparing European,Japanese and US Firms

Using an internationally linked patent database, this paper compares the types of R&D activities undertaken by multinationals in China by home country and industry. In China, multinationals recently began investing in R&D, mainly in the areas of product and manufacturing process development. However, US firms, which are the most actively invested in R&D, are involved in some technology‐driven R&D activities; European firms are inclined toward market‐driven R&D, while Japanese firms, which lag behind the other two, focus on production‐driven R&D. This pattern may be related to the relative competitiveness of each country: Japanese firms are strong in electronics and automobiles, where production process improvement is important, while US firms flourish in science‐based industries, such as pharmaceuticals and software, where interacting with the local science base is a critical factor.     

Divestiture and Its Implications for Innovation and Productivity Growth in U.S. Telecommunications

This study has sought to determine the impact of policy changes that led to the breakup of the monopoly structure of U.S. telecommunications on productivity and research activities of AT&T. A simultaneous-equations model is used to examine the relationship between research intensity, market share, firm size, and total factor productivity (TFP) before and after divestiture. The results show that the effect of divestiture on productivity is negative but that competition has a significantly positive effect. Contrary to popular argument, competition led to significant increases in R&D investment by AT&T. The study also finds a strong and positive relationship between R&D and productivity in the postdivestiture period, marked by its absence in the predivestiture years. Scale economies remain important, indicating the industry continues to favor large firms.     

R&;D and Exporting: A Comparison of British and Irish Firms

This paper investigates the two-way relationship between R&D and export activity. In particular, we concern ourselves with the question whether R&D stimulates exports and, perhaps more importantly, whether export activity leads to increasing innovative activity in terms of R&D (learning-by-exporting). We use two unique firm level databases for Great Britain and the Republic of Ireland and compare the results for these two countries. We find that previous exporting experience enhances the innovative capability of Irish firms. Conversely, no strong learning-by-exporting effects are found for British firms. Arguably part of the differences between Ireland and Britain are attributable to different, cross-country exporting patterns where Irish firms have a greater interface with OECD markets. JEL no.  F14, F23     

Knowledge spillovers from foreign direct investment in R&D: Evidence from Japanese firm-level data

This study uses firm-level panel data from the Japanese manufacturing industries and examines whether foreign direct investment generates intra-industry knowledge spillovers to domestic firms. The analysis found positive effects of R&D stocks of foreign firms on the productivity of domestic firms, while effects of capital stocks of foreign firms were absent, suggesting that knowledge of foreign firms spills over through their R&D activities, but not through their production activities. In addition, we found that the extent of spillovers from R&D stock of foreign firms is substantially larger than spillovers from R&D stock of domestic firms.     

Determinants of internal and external R&D: Some Dutch evidence

Summary Innovating firms can choose to engage in either internal or external R&D, or in both. In the current study, we shall examine internal and external R&D separately to determine empirically the market structure characteristics explaining the external R&D share and the differences in market structure determinants between internal and external R&D. Our results indicate that a government policy that aims at stimulating technological progress by offering external research facilities is particularly interesting for smaller, capital-intensive firms operating in less concentrated markets.We would like to thank Alfred Kleinknecht for providing the R&D data and Kees Bakker and Yvonne Prince for providing the market structure data. We thank Alfred Kleinknecht, Bart Nooteboom and an anonymous referee for their comments and suggestions We acknowledge a research grant from the Stichting KMO Fonds.     

Advertising, in-house R&D, and growth

This paper develops a quality-ladder model of endogenous growthto study the interplay between in-house R&D and combativeadvertising expenditure, and its implications for economic growth,firm size, and welfare. The analysis shows that, somewhat surprisingly,higher incentives to engage in advertising, although combative,unambiguously foster innovation activity of firms. This, possibly,leads to faster growth and even higher welfare. These resultsrest on two features of the model which are well-supported byempirical evidence. First, if firms incur higher sunk costsfor marketing, concentration and firm size rise. Second, firmsize and R&D expenditure are positively related as largerfirms are able to spread R&D costs over higher sales. Theanalysis also suggests that R&D subsidies are conduciveto R&D and growth without inducing firms to raise advertisingoutlays.