Industry influence on firms' R&D and innovation |
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Authors: | Asad A Rind Wajih Abbassi Marco Bigelli Wael Rouatbi |
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Institution: | 1. South Champagne Business School, Y Schools, Troyes, France;2. Institut de Recherche en Gestion, Université Paris-Est-Créteil, Creteil, France
Faculty of Business and Management, Muscat University, Muscat, Oman;3. Department of Management, University of Bologna, Bologna, Italy;4. Montpellier Business School, Montpellier, France |
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Abstract: | This paper examines the effect of peers on a firm's research and development (R&D) policy. We show that firms do not make R&D decisions in isolation, and that industry dynamics play an important role in defining a firm's R&D intensity. Using a large sample of 54,393 firm-year observations from 1991 to 2015 in the United States, we find that firms' R&D decisions are mainly driven by their industry peers' R&D policies. Moreover, we find that R&D mimicking is significant only in the presence of strong product market competition, whereas we do not find any evidence of information-based herding in R&D investments. Our additional analysis shows that our main conclusions remain valid even in the presence of financial constraints, and regardless of the firms' market positions. Finally, we provide evidence that R&D mimicking increases firms' future values, future patent outputs, and estimated patent dollar values. Our findings are robust to endogeneity concerns, and to using alternative sample compositions, R&D intensity proxies, and different industry classifications. |
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Keywords: | behavioral finance mimicking behavior information asymmetry R&D |
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