R&D subsidies and the performance of high-tech start-ups

This paper addresses the question of the efficacy of R&D policy measures in support of high-tech start-ups. We show that subsidies awarded on a competitive basis lead to a positive effect, while those assigned through an automatic procedure do not.     

Forex interventions and exchange rate exposure: Evidence from emerging market firms

Foreign exchange (forex) interventions by central banks have recently become too frequent in emerging markets. The effects of these interventions on exchange rate volatility are widely documented, but their implications for firm-level outcomes have rarely been examined. This study argues that forex interventions should influence the sensitivity of firms’ cash flows to currency movements. Accordingly, I address a novel question regarding the effect of forex interventions on emerging market firms’ exchange rate risk exposure. I find an asymmetric effect, such that the impact of forex purchase interventions differs from that of forex sale interventions. Moreover, the positive effects of forex sale interventions on the magnitude of firms’ exposure are more pronounced during depreciation periods. Study findings imply that firms remain unhedged, given that interventions are perceived as implicit government guarantees against currency fluctuations. Credible communication from policymakers regarding the motives for interventions by central banks would assist in alerting firms to potential currency risks.     

Indigenous technological capabilities,emerging market firms and the aerospace industry

While emerging market economies have developed significant technological capabilities and increased their share of global value-added in aerospace, they have done so largely through utilising foreign direct investment (FDI) and offset arrangements to enter supply chains that remain dominated by European and American firms. The paper examines whether emerging markets are developing indigenous technological capability in aerospace technologies. Drawing on patent data from the Thomson Innovation database, the study seeks to understand whether anchor tenant capability is indeed forming in emerging markets. A tech-mining method is applied. The study suggests that China, in particular, has dramatically increased its innovative capacity in the area. However, the data also demonstrate the significant advantages enjoyed by incumbent firms from Europe and the USA, suggesting that the complexity of aircraft R&D remains a formidable barrier that can only be surmounted by determined government policies and anchor firms equipped with substantial innovation capabilities.     

Firm growth and R&D: Evidence from the Portuguese manufacturing industry

This work studies the effects of R&D activities and investment, both physical and R&D, on the growth of firms by considering a dynamic firm growth model with serial correlation. The main hypotheses maintain that firms with a strong commitment to R&D have a higher growth rate, and investment has a positive effect on firm growth. We investigate such relations with reference to an unbalanced panel data set of Portuguese manufacturing firms over the period of 1990 to 2001. We find that a systematic tendency for smaller firms to grow more quickly is the main reason why firm growth is not entirely stochastic.     

R&D,export and investment decision: evidence from European firms

This article provides an empirical investigation of the mechanism through which R&D influences export and tangible investment decisions. The analysis is based on a large representative and cross-country comparative sample of manufacturing firms across seven European countries. The novelty of this work lies in the three aspects. First, we expand the results on the R&D–export and R&D–investment relationships to a wide sample of cross-European firms. This differentiates from previous works based on single-country samples. Second, to the best of our knowledge, this study is the first in years which assess empirically the relationship between R&D and tangible investment at the micro level. Third, we control for endogeneity of R&D and simultaneity in firms’ decision whether to export and carry out tangible investment. The results of the analysis suggest that R&D positively affects export propensity and tangible investment. The results also reveal that neglecting endogeneity and simultaneity issues leads to underestimate the effect of R&D to both export and investment propensities.     

The power of market mood — Evidence from an emerging market

This article focuses on investor behavior and, consequently, the mood in the market. By using a self-organizing network we develop a model which tries to capture the market mood and serves as an indicator of the reasonableness of selling or purchasing securities. In this sense, the final result of this model is the same as in the model-type prediction of future stock prices, with the only exception being that one is not required to know the concrete future values of the selected security. This will indirectly support the hypothesis that psychological factors are an important (if not key) market driving force.     

R&D organization,monitoring intensity,and innovation performance in chinese industry

This paper examines the relationship between organizational design and technological innovation in Chinese industry. In a principal-agent model, monitoring intensity is an endogenously determined input to innovation production. A recursive system of an innovation production function and a monitoring intensity equation, where the latent monitoring intensity is indicated by the existence of an R&D organization, is estimated with a nonlinear two-stage estimator for a sample of large- and medium-sized Chinese state-owned enterprises. It is the first knowledge production function estimate for China's enterprises. I find that R&D organization affects innovation performance positively and significantly.     

Impact of firm size and industry type on R&D efficiency throughout innovation and commercialisation stages: evidence from Korean manufacturing firms

Technological innovation through R&D is a critical element in enhancing and fostering firm performance. In particular, measurement of R&D efficiency throughout the innovation and commercialisation stages is important. However, almost of R&D efficiency-related studies assumed that R&D is a single stage. This study aims at analysing relative efficiency scores throughout the stages of the R&D process using a two-stage data envelopment analysis (DEA) model with a sample of 1039 Korean manufacturing firms. Based on our preliminary results, this study was extended by comparing subsample groups categorised by firm size and industry type. The key findings include: (1) firms show imbalanced R&D efficiency throughout the two stages and (2) R&D efficiency is different by firm size and industry type. The empirical results and findings may assist policy- and decision-makers to enhance R&D efficiency at the firm level. Moreover, introduction of the two-stage DEA model and comparative analysis methods to firm-level data contributes to scholars.     

Innovation in R&D service firms: evidence from the UK

Research and Development (R&D) service firms make significant contributions to innovation in other businesses. The extant literature considers these firms a homogenous sub-group of Knowledge Intensive Business Service firms (KIBS). The objective of this study is to investigate how R&D service firms innovate and the variety of innovation practices within these firms. Employing data from semi-structured interviews with senior managers from 32 UK-based R&D service firms, we suggest that there are two different modes of innovation: in the first mode, R&D service firms innovate similarly to KIBS whose innovation is ad-hoc in nature and driven by customers’ requests; another group of R&D service firms innovate like New Technology-based Firms (NTBFs) relying more on structured in-house R&D activities.     

The relationship between international financial reporting standards,carbon emissions,and R&D expenditures: Evidence from European manufacturing firms

This study examines the impact of research and development (R&D) expenditures on carbon dioxide (CO2) emissions prior to and under the mandatory adoption of International Financial Reporting Standards at the firm level within the manufacturing sectors of three European countries, i.e. Germany, France and the U.K. Estimation of a threshold autoregressive model using quarterly data from 1998 to 2011 reveals that in the post-IFRS mandatory adoption year R&D expenditures show a reduction in CO2 emissions to firms, i.e. rising CO2 abatement. This is likely due to the presence of incentives provided by the new accounting disclosure regime. Our results remain robust in terms of a sector analysis, firm size, and the introduction of the European Union Emission Trading Scheme (EU-ETS) across the three countries.     

Relocation and investment in R&D by firms

The literature on foreign direct investment has analyzed corporate location decisions when firms invest in R&D to reduce production costs. Such firms may set up new plants in other developed countries while maintaining their domestic plants. In contrast, we here consider firms that close down their domestic operations and relocate to countries where wage costs are lower. Thus, we assume that firms may reduce their production costs by investing in R&D and likewise by moving their plants abroad. We show that these two mechanisms are complementary. When a firm relocates it invests more in R&D than when it does not change its location and, therefore, its production cost is lower in the first case. As a result, investment in R&D encourages firms to relocate.     

R&D Returns,Spillovers and Firm Incentives: Evidence from China

Using a new data set of 12,000 firms in China, this paper estimates the returns to R&D investment and its spillover effects, and investigates how the returns to R&D depend on firm incentives. For the firms in the sample, the results show that on average firm output increases around 0.4 yuan for each additional 1 yuan spent on R&D in the previous year, and there is high R&D return regardless of whether the endogeneity of R&D intensity is dealt with or not. Interestingly, the marginal return to R&D is significantly higher in firms whose CEOs were not appointed by the government, and lower when CEO pay is directly related to annual performance. The return to R&D is higher in relatively poor regions and for firms with worse access to finance. There are also non-trivial R&D spillover effects.     

Asymmetric firms,technology sharing and R&D investment

We use a combination of theory and experiment to study the incentives for firms to share knowledge when they engage in research and development (R&D) in an uncertain environment. We consider both symmetric and asymmetric starting points with regards to the amount of initial knowledge firms have before conducting R&D and look at how differences in starting positions affect the willingness of firms to share knowledge. We investigate when and if firms find R&D cooperation beneficial and how investment in R&D is affected by the outcome of the sharing decisions. The experimental evidence shows that overall subjects tend to behave consistently with theoretical predictions for the sharing of knowledge, although leaders who are not compensated by a side payment from laggards are more willing to share than predicted by the theory, and leaders who are compensated are less willing. The data on investment suggests less investment with sharing than without, consistent with theory. Compared to exact numerical predictions, there is overinvestment or underinvestment except for symmetric firms under no sharing. All cases of overinvestment and underinvestment, regardless of sharing or not and regardless of starting positions, are well explained by smoothed-out best (quantal) responses.     

R&D and productivity growth: Evidence from the UK

Although the econometric evaluation of R&D has attracted wide interest in many countries, it has not attracted much in the UK. The main objective of this paper is to fill this void, i.e., to estimate the impact of R&D on productivity growth of the UK manufacturing sector. However, there are some additional objectives. Firstly, we estimate the impact of R&D on productivity growth of large and small firms and we discuss a number of theoretical arguments regarding the role of firm size. Secondly, given that the technological infrastructure influences the innovative capacity of a firm, we compare the impact of R&D on productivity growth of high-tech firms with the corresponding impact on productivity growth of low-tech firms. Thirdly, we investigate whether the contribution of R&D to productivity growth has changed over time.

Based on firm-level data (78 firms, 1989–2002), we find that the contribution of R&D is approximately 0.04. Although the R&D-elasticity of large firms (0.044) is higher than the corresponding elasticity of small firms (0.035), the difference is small. In contrast, the R&D-elasticity is considerably high for high-tech sectors (0.11), but statistically insignificant for low-tech sectors. Finally, the investigation of the elasticity of R&D over time revealed an interesting discontinuity showing that although until 1995 the R&D-elasticity was approximately zero, after 1995 it increased dramatically to 0.09. We investigate the potential causes of such non-linearity and we suggest a number of possible explanations.     

Market value,R&D,and patents

A significant relationship is found between the market value of the firm and its ‘intangible’ capital, proxied by past R&D expenditures and the number of patents, based on a time-series cross-section analysis of data for large U.S. firms.     

R&D spending in the high-tech sector and economic growth

The present paper provides new estimates of the impact of investment in R&D on long-term economic growth. In particular, we estimate a dynamic empirical growth model using panel data for OECD countries from 1970 to 2004. This study is the first to investigate whether the specialization of R&D activities (i.e. share of R&D investment in the high-tech sector) has an additional effect on GDP per working age population. Using a system GMM estimator in order to control for endogeneity, we find that both the ratio of business enterprises’ R&D expenditures to GDP and the share of R&D investment in the high-tech sector have strong positive effects on GDP per capita and GDP per hour worked in the long term.     

Productivity and R&D sources: evidence for Catalan firms

This paper draws on a sample of innovative Catalan firms to identify how two main sources of innovation – internal R&D and external R&D acquisition – affect productivity in the manufacturing and service industries. The sample comprises 1612 innovative firms from the fourth European Community Innovation Survey (CIS-4) during the period 2002–2004. We compare empirical results when applying the usual OLS and quantile regression techniques controlling with a non-parametric sample selection. Our results indicate the different patterns that are attributable to the two sources of innovation as we move up from lower to higher conditional quantiles. First, the marginal effect of internal R&D on productivity decreased as we moved up to higher productivity levels. Second, the marginal effect of external R&D acquisition increased as we moved up to higher productivity levels. Finally, empirical results show significant complementarities between internal and external R&D, which are higher for knowledge-intensive service sectors.     

Technology clubs, R&D and growth patterns: Evidence from EU manufacturing

This paper investigates the forces driving output change in a panel of EU manufacturing industries. A flexible modeling strategy is adopted that accounts for: (i) inefficient use of resources and (ii) differences in the production technology across industries. With our model we are able to identify technical, efficiency, and input growth for endogenously determined technology clubs. Technology club membership is modeled as a function of R&D intensity. This framework allows us to explore the components of output growth in each club, technology spillovers and catch-up issues across industries and countries.     

R&D and productivity in Danish firms: some empirical evidence

The aim of the paper is to examine the relationship between R&D capital and productivity using microdata for Danish manufacturing firms. The influence of factors such as ownership, innovative characteristics and source of funding accounted for. The return to accumulated R&D capital is estimated to be in the neighbourhood of 9–12%, whereas the short-run effect of R&D is insignificant. Furthermore, the direct influence from foreign ownership, source of funding accounted for, innovative characteristics and ownership dispersion on productivity are analysed. However, none of the factors seem to have an impact on firm productivity. The same is the case for the indirect influence coming from interaction with accumulated R&D capital.     

Determinants of R&D in an LDC: The Indian engineering industry

R&D behaviour of LDC industrial firms is an unexplored subject. Data on the largest engineering firms in India are analysed to test the hypothesis that technological effort in LDCs is primarily directed at assimilating and adapting foreign technologies.