The role of spillovers in research and development expenditure in Australian industries

Using administrative data from firms in Australia that conduct research and development (R&;D), we examine how R&;D activity of other firms and public institutions affect a firm's own R&;D expenditure. We distinguish between the impact of peers, suppliers and clients. We examine whether geographical proximity and industrial clustering affect R&;D spillovers. Overall, we detect positive effects on R&;D expenditure from spillovers from peers and clients to firms that are nearby; within 25 or 50?km. R&;D expenditure by academia, unlike by government bodies, has a positive influence on a firm's own R&;D expenditure within state boundaries. We fail to find any significant role for industrial clusters in augmenting spillover effects.     

Technological Activity and Employment in a Panel of UK Firms

We investigate the relationship between technological activity, proxied by R&D, patents, and trade marks, and employment for a panel of British production firms from 1987 to 1994. We modify standard derived demand for labour to include technology variables. We find employment is fostered by R&D expenditure and UK patent publications, ceteris paribus on factor costs and current sales. The employment impact of R&D is bigger in high technology sectors, but employment increase from UK patenting activity is bigger in mature technology sectors. In further analysis of persistent differences (the estimated firm fixed effects) UK trade marks and US patents are also positively associated with employment.     

Experiences of high-growth technology firms in Malaysia and New Zealand

How do technology firms experience high growth and the support available from governments? This qualitative study explores the experiences of high-growth technology-based firms in Malaysia and New Zealand. Case studies were developed for eight high-growth companies in the information and communication technology sectors of each country. The countries differ in national cultures and the forms of government support. There were no marked country differences in growth drivers. Growth was driven by innovation and flexibility within business-to-business sales relationships. These firms faced four obstacles: intense competition; liabilities of smallness; limited human capital; and funding ability. Malaysia offers broader mainstream support with favourable tax treatment of R&;D related expenditure. In contrast, New Zealand’s has been criticised for a highly targeted approach, although this is now broadening. Both countries appear to be converging on a hybrid approach combining mainstream and targeted support for growth businesses.     

Technological Change, Market Rivalry, and the Evolution of the Capitalist Engine of Growth

In the early stages of Western industrialization, innovation was the domain of individuals who devoted their entrepreneurial talents to the development of a new product or process, typically setting up a new firm in order to take the innovation to the market. Today, commercial R&;D is almost exclusively carried out by corporate laboratories affiliated with manufacturing firms. The corporate R&;D lab, however, did not exist in its modern form until the late nineteenth century. The history of Western industrialization, thus, suggests that a fundamental change in the structure of incentives, and consequently in the nature and the organization of the R&;D process, occurred around the turn of the century. Three questions arise. What is the nature of this change? What economic forces caused it? What are its implications? To answer these questions, I construct a model where this change is endogenous to the evolution of the economy toward industrial maturity. The change in the locus of innovation—from R&;D undertaken by intventor-entrepreneurs, to R&;D undertaken within established firms in close proximity to the production line—results from the interaction of market structure and technological change. This interaction captures the essence of the evolution of the capitalist engine of growth and provides an economic explanation of a “stylized fact” that has received no attention in the theoretical literature. The endogenous market structure generates dynamic feedbacks that shape the growth path of the economy and determine the structural change it undergoes, including the endogenous formation of corporate R&;D labs. The evolution of market rivalry explains when and how established firms become the major locus of R&;D activity.     

The effect of science and technology parks on firms’ performance: how can firms benefit most under economic downturns?

The objective of this research is to evaluate the effect of the economic recession on the performance of firms located in science or technological parks. Compared to off-park firms, we propose that under an economic crisis park benefits are more noticeable, since firms located inside parks have less resource restraints and access to external sources of information and knowledge. Moreover, we observe that as firms invest on internal R&D, they tend to reinforce these park benefits. Empirical evidence gathered data on employment and sales from 2007 to 2012 for the group of firms which participated in the Spanish Technological Innovation Panel. The results confirm the positive role played by science and technology park locations under economic downturn environments, especially when firms investing in internal R&D.     

Nonparametric quantile regression analysis of R&D-sales relationship for Korean firms

This paper applies the nonparametric quantile regression estimation procedure to the analysis of the innovation-firm size relationship using Korean manufacturing firms data. Due to the high asymmetric distribution of R&D expenditure, the mean regression does not capture properly the stylized facts of R&D behavior; hence it underestimates the sales elasticity. Comparing the parametric estimates and nonparametric estimates allows us to see that there exists a nonlinear relationship in innovative activity and sales. Dividing the data into three groups according to the sales volume, the elasticity in the medium-sized firms is the biggest for scientific firms. This result conforms that the findings of Scherer (1965) coincide with findings from Korean manufacturing firms data in the sense that R&D expenditure tends to increase faster than firm size with size up to a point and then more slowly among larger firms. For the non-scientific firms, it steadily increases showing increasing returns to scale in innovative activity in large firms.     

The impact of financial constraints on firm survival and growth

We propose a new approach for identifying and measuring the degree of financial constraint faced by firms and use it to investigate the effect of financial constraints on firm survival and development. Using panel data on French manufacturing firms over the 1996–2004 period, we find that (1) financial constraints significantly increase the probability of exiting the market, (2) access to external financial resources has a positive effect on the growth of firms in terms of sales, capital stock and employment, (3) financial constraints are positively related with productivity growth in the short-run. We interpret this last result as the sign that constrained firms need to cut costs in order to generate the resources they cannot raise on financial markets.     

Does a strong patent regime discourage innovation?

Does a strengthening of the patent regime impact R&;D expenditure? For the US semiconductor industry, a strengthening of the patent regime in the 1980s was followed by a sharp increase in patenting but had almost no impact on R&;D expenditure. This paper attempts to understand this patent paradox by taking some of the industry features into account. We present a model of invention and product development in complex industries where product development involves putting together a large number of inventions and where licensing of patentable inventions is common. While a stronger patent regime leads to higher patenting in both in presence and absence of licensing, the positive relationship between patenting and R&;D is weakened in presence of licensing since licensing provides an alternative way of accessing inventions. A stronger patent regime, therefore, may only create weak incentives to increase R&;D, while strongly increasing patenting activities in such an industry.     

INTER AND INTRA FIRM DIFFUSION OF ICT IN THE UNITED KINGDOM (UK) AND SWITZERLAND (CH) AN INTERNATIONALLY COMPARATIVE STUDY BASED ON FIRM-LEVEL DATA

This paper examines the effect of participation in government-sponsored R&;D consortia on the R&;D productivity of firms in the case of robot technology in Japan. We attempt to provide a new empirical analysis and discussions on the issue of government project evaluation by investigating the impact of the evolution of government programs, and to compare government-sponsored R&;D consortia with collaborative R&;D among firms. Using indicators of the quality of patents, which enables us to provide an estimation of quality-adjusted research productivity, we find that participation in government programs has a positive impact on the research productivity of participating firms. Moreover, the impact of participation became much higher after the design of government programs in this field changed in the late 1990s. Also, we find that participation in government-sponsored consortia has a greater impact on research productivity than participation in collaborative R&;D among firms. This may support government involvement in R&;D as a coordinator of R&;D collaboration.     

Free software on the market-side: the failure-story of free software services companies in France

ABSTRACT

This article investigates two research funding policies in a cooperative and a non-cooperative R&;D setting: subsidising private research (Spr) and subsidising public research (Spu). We show that R&;D cooperation with subsidies (either Spr or Spu) always performs better than R&;D cooperation with no subsidy. Furthermore, the Spr policy leads to better performance than the Spu approach does in terms of overall net surplus whether the firms cooperate or not in R&;D. Nevertheless, comparing the two research funding policies for the same level of public spending shows that the Spu policy with R&;D cooperation is in some cases more effective than the Spr policy, the latter becoming too costly for the government when spillovers are high.     

Employment growth and innovation at the firm level

We analyze the influence of innovation on growth rates of employment in 859 Dutch manufacturing firms over the period 1983–1988. Whereas the (growth of the) R&D intensity of firms has a slightly negative impact on employment, we find that firms with a high share of product-related R&D (as a proxi of R&D related to industrial activities in an early stage of the life cycle) experienced an above average growth of employment. The same holds for firms which directed their R&D towards information technology. Smaller firms have, ceteris paribus, substantially higher growth rates of employment than their larger counterparts. Against our expectations, R&D cooperation has no significant impact on employment growth. The same holds for activities in the fields of biotechnology and new materials.     

Detecting which firm-specific characteristics impact market-oriented R&D

This paper investigates which firm-specific characteristics lead multinational enterprises (MNEs) to increase their R&D expenditure in host countries as a way of expanding their business into local markets (market-oriented R&D). The literature that addresses this topic is quite limited because of the difficulty of separating market-oriented R&D expenditure from knowledge-sourcing R&D expenditure in the data. We argue that determining the relationship between local sales and R&D expenditure is a better way to identify whether MNEs are investing market-oriented R&D than is separating the two types of R&D. For connecting firm-specific characteristics, local-market sales, and R&D expenditure together, we adapt two-stage regressions. By employing data from Taiwanese multinationals from 2003 to 2006, we found that if an MNE moves its technology toward capital-intensive products, it increases its R&D expenditure to promote its sales in the local markets in the host country.     

Demand shocks and firm-financed R&D expenditures

Business cycles might affect firms'?ability and incentive to perform R&;D. Firms finance most R&;D activities out of cash flow so when cash flow decreases the funds available for R&;D also decreases. This limits the ability of firms to perform R&;D, potentially leading to reduced R&;D expenditures during recessions. However, business cycles also influence the incentive to perform R&;D. The opportunity cost of funds devoted to R&;D falls during recessions since the return on production will likely be lower than during an expansion. During recessions, this provides firms with an incentive to redistribute an existing pool of funds away from production and towards R&;D projects. This paper tests whether the business cycle influences the incentive and ability of firms to engage in R&;D activities, in particular examining whether the response is symmetric across the business cycle.     

Technological Change and Population Growth

What is the relationship between the rate of population growth and the rate of technological change? To answer this question, I discuss a model where increasing returns generate long-run growth but where the scale effect is absent. More precisely, the model predicts that steady-state productivity growth does not depend on population size because an increase in population size leads to entry. The resulting crowding-in effect generates dispersion of R&;D resources across firms and offsets the positive effect of the scale of the economy on the returns to R&;D. Changes in population size have only transitory effects on productivity growth. This desirable property allows me to introduce population growth in the model and study the effects of demographic shocks. The predicted patterns of growth, entry, and change in industrial structure match the experience of several industrialized countries. In addition, they match several of the empirical observations cited as evidence against standard models of endogenous technological change.     

同群效应与公司研发*——来自中国的证据

本文研究了“同群公司”的研发支出对公司自身研发行为的影响。研究发现，同群公司研发支出越多，公司自身研发支出也越多。进一步研究发现，在公司与同群公司地理距离较近或同群公司分析师覆盖程度较高情况下，同群公司研发支出与公司自身研发支出的正相关关系更强。此外，同群公司研发支出会提高公司自身研发支出与未来业绩的正相关程度。研究表明，公司会学习同群公司的研发决策，进而改变其自身研发决策，呈现显著的研发支出同群效应；且公司信息解读成本较低时，研发支出同群效应更为显著。本文不仅丰富了关于研发支出影响因素的研究，还拓展了对研发溢出效应的研究。本文的研究结论对公司制定研发决策具有重要指导意义。     

Multinational companies and indirect employment: measurement and evidence

This study suggests a new approach towards measuring the indirect employment effects of multinational companies (MNCs) using a simple Cobb-Douglas production function. Based on the assumption that domestic sales by indigenous firms in a sector are supplies for multinationals in that sector rather than final goods, indirect employment effects are measured as the effect of an increase in domestically purchased inputs on employment in indigenously-owned suppliers. Applying this measure to data for the electronics sector in Ireland we find that there have been positive indirect effects of MNCs on employment in indigenous firms. The value of the estimated coefficients depends somewhat on the specification of the model estimated but the standard specification suggests that a 10% increase in domestically sold output by indigenous firms leads to an employment growth of around 2% in these firms.     

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 expenditures and firm growth – is small beautiful?

ABSTRACT

This paper examines how efficiently different groups of firms use their R&D expenditures. To this end, it investigates how the empirical relationship between firms' R&D expenditures and their sales growth varies with different values of firm size, firm age, and the number of firms in the respective industry. Using panel data for Switzerland ranging from 1995 to 2012, the paper finds that smaller, more mature firms show a more positive relation between R&D expenditures and sales growth than both relatively larger or younger firms. The paper argues that, on the one hand, these firms can benefit from various small size advantages in the R&D process, such as more motivated researchers, caused by a stronger connection to the firm's fate. On the other hand, these firms can also benefit from a well-established R&D department that allows absorbing the latest technological developments. The paper further finds that industries consisting of many small firms show a more positive relation between R&D expenditures and sales growth than industries consisting of only a few large firms. The intuition behind this result is that industries consisting of many small firms imply more independent innovative trials, which then together result in a higher probability of discovering successful innovations. In sum, the paper finds that groups consisting of a large number of small, more mature firms spend their R&D in the most efficient way.     

Knowledge diversity as a moderator: inter-firm relationships,R&D investment and absorptive capacity

The study examines how knowledge diversity moderates the effects of R&;D investment, strategic alliances, and acquisitions on firm performance using a sample of 2404 firm-year data from US technology firms. Results confirm that the main effect of knowledge diversity on firm growth is not significant and it indeed plays a role of a moderator. The theory of absorptive capacity provides a good explanation that for firms with high knowledge diversity, strategic alliances and acquisitions are more effective while for firms with low knowledge diversity, internal R&;D investment is more effective. These findings point to an important research direct that the characteristics of a firm's knowledge portfolio play a critical role in determining the effectiveness of knowledge sourcing as well as interfirm partnership strategies.     

Multinational enterprises and innovation: firm level evidence on spillover via R&D collaboration

This paper estimates the knowledge spillovers to multinational enterprises (MNEs) in Sweden via domestic and foreign R&;D collaboration. Applying an augmented generalized method of moments-estimator that accounts for selectivity and simultaneity bias on data from 1,249 MNEs, our research has resulted in five distinct conclusions. First, we find that the knowledge spillovers via R&;D collaboration typically take place as a network phenomenon rather than a process between the local firm and a single innovation partner. Second, successful collaboration is conditional on the presence of foreign innovation partners in the network. Third, output is found to be an increasing function of R&;D-collaboration only among non-export oriented firms. Fourth, foreign MNEs, selling mainly to local and regional markets in Sweden, benefit more from R&;D collaboration than do other firms. Overall, the results show that demand-driven motives that require entrepreneurial knowledge to adapt products to local consumers and markets are more important for successful R&;D-collaboration than supply-driven motives.