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 subsidies and private R&D expenditures: evidence from Italian manufacturing data

This paper uses a comprehensive firm level data set for the manufacturing sector in Italy to investigate the effect of government support on privately financed R&D expenditure. Estimates from a non‐parametric matching procedure suggest that public assistance has a positive effect on private R&D investment in the sense that the recipient firms achieve more private R&D than they would have without public support. This indicates that the possibility of perfect crowding out between private and public funds can be rejected. Furthermore, in this sample of Italian firms, tax incentives appear to be more effective than direct grants. The paper also examines whether public funding affects the financial sources available for R&D and finds that grants encourage the use of internal sources. The results also show some evidence of positive effects on credit financing for R&D.     

Impact of patenting on firms' performance: an empirical investigation based on manufacturing firms in India

The study aims to estimate the impact of R&D expenditure and patenting on the performance of firms using productivity, profitability and Tobin's q ratio as the performance indicators. The study uses firm-level data of 489 high- and medium-technology firms during the period of 2000–2010. We employ relatively a new source of data particularly in the context of India, firm-level patent granted, that has not been explored earlier. The study finds that firms patenting result in productivity improvement of firms, whereas R&D expenditure does not. The study further finds the evidence of positive impact of patenting on financial performance of firm with significant differences between foreign and domestic firms.     

The missing link between innovation and performance in Brazilian firms: a panel data approach

This study aims to verify if there is a positive relationship between innovation and productivity and/or profit in Brazil using a recursive model in line with the Crépon, Duguet and Mairesse (CDM) model. Using a rich combination of three databases, this paper considers a sample of more than 10,000 Brazilian industrial firms and the period 2001–2008. Besides using R&D expenditure as a measure of innovation input, this study also tests the technical-scientific personnel stock as a more appropriate measure of innovative effort in emerging countries. This variable considers the tacit knowledge intrinsic to the worker and corrects a possible measurement error bias in the R&D expenditure variable. The empirical strategy uses a reduced form of the CDM model in a panel data structure to provide consistent estimates as it controls for selectivity, simultaneity and endogeneity due to unobserved firm effects. There are still few studies that apply the CDM model for panel data, especially regarding developing countries. The main results suggest that technical-scientific workers positively affect the firms’ probability to innovate while R&D expenditure has no effect. The results also highlight the absence of the effect of innovation on productivity and profit, suggesting a missing link between innovative efforts and Brazilian firms’ performance.     

Firms’ human capital, R&D and innovation: a study on French firms

This article investigates the effects of human capital and technological capital on innovation. While the role of technological capital as measured by research and development (R&D) expenditure has been intensively investigated, few studies have been made on the effect of employee training on innovation. This article explores the relationship between innovation and firm employee training. Our methodological approach contributes to the literature in three ways. We propose various indicators of firm employee training. We build a count data panel with a long time-data series to deal with the issue of firms?? heterogeneity. We propose a dynamic analysis. Using dynamic count data models on French industrial firms over the period 1986?C1992, we find positive and significant effects of R&D intensity and training on patenting activity. Whatever the indicators of training our results show that the firm employee training has a positive impact on technological innovation.     

R&D,productivity, and exports: Plant-level evidence from Indonesia

This study examines the relation between productivity and exports in Indonesian manufacturing firms by taking account the endogenous choice of R&D. We first examine the determinants of R&D activity and find that exporting activity contributes positively to plants' R&D activity, while multinational corporate do not have a higher R&D propensity. The simultaneous estimates on the interrelation of R&D, productivity, and export show that R&D has a positive impact on both productivity and exports, suggesting the importance of R&D to Indonesian economic growth. It suggests also a two-way causality between productivity and exports, implying the coexistence of self-selection and learning-by-exporting effects in Indonesian manufacturing sector.     

Exports and innovation: the role of heterogeneity in exports

This paper examines whether and how heterogeneity in exports affects firms’ innovations in China. Using comprehensive transaction-level trade data from China Customs to construct various dimensional measures exports, empirical results obtained from a matched firm-transaction panel data find that exports overall have a positive impact on promoting innovations in terms of R&D and new product sales. The innovation-enhancing effect of exports depends on the heterogeneity in exports. Firms with greater varieties of exports, more market diversification, and higher export quality are associated with a higher R&D propensity and more new product sales, while process exports are found a negative association with innovations.     

R&D and patents: is it a two way street?

ABSTRACT

This paper provides empirical evidence on the link between firms’ R&D expenditure and patent registrations by applying the Granger causality test. We use a panel of Spanish manufacturing firms for the period 1990–2013. We first, examine the R&D-patents relationship in the manufacturing firms as a whole and subsequently, manufacturing was broken down into three groups of firms according to the technological level of the industries to which the firms belonged: high and medium-high (HMHT), low medium (LMT) and low (LT) technology firms. For the entire panel, our results provide support for a bidirectional relationship between R&D and patents, supporting both the traditional view and the reverse causality approach (patents cause R&D). When the sample is split into the three technology levels, we also find strong support for a bidirectional relationship in HMHT firms and weak support in LT ones. We found no evidence of this bidirectional link in LMT firms.     

Does R&D spending boost tangible investment? An analysis on European firms

This article investigates the relationship between firm’s R&D intensity, expressed as R&D expenditure over sales, and investment intensity in tangible assets. It is commonly acknowledged that R&D requires additional physical investment to be implemented. R&D increases a firm’s productivity and return to tangible investments, thus, providing to the firm incentives to bear high tangible capital costs and to invest more. This represents a crucial issue for a firm’s growth, particularly considering the strong interaction between physical capital accumulation and technological progress. The analysis is based on a large sample of manufacturing firms across seven European countries in the period 2007–2009. Since the sub-sample of firms performing R&D might not be random, there may potentially be an endogeneity issue. The analysis also considers that firms may decide to spend on R&D and investment in physical capital simultaneously. The questions of both endogeneity and simultaneity are dealt with by employing an instrumental variable two-step procedure. We find a positive and significant impact of R&D intensity on firms’ tangible investment intensity. The econometric results highlight the importance of financial factors, particularly with respect to firms’ internal resources. Exposure to international trade has a negative impact on investment, possibly depending on the time-span of the sample used.

Abbreviations: Technological Innovation and R&D; Investment Capital; Industry Studies; Firm Behavior; Empirical Analysis     

Persistence and economic effects of technological innovations: a dynamic and sequential analysis of Uruguayan manufacturing firms

This paper analyzes the long-term relationship between research and development (R&D), innovations and productivity in 400 Uruguayan manufacturing firms during the period 2001–2009 based on a modified version of the structural model of Crepon, Duguet and Mairesse. The paper also analyzes thoroughly the decision of these firms to engage in R&D activities by using a novel categorical dependent variable, which takes three values: non-performance R&D activities, occasional performance or continuous performance over the period. Furthermore, the study investigates whether these manufacturing ?rms innovate persistently or discontinuously over the period. The results suggest a positive link between the intensity of R&D activities and the generation of product and process innovations. They also indicate that innovation probability is temporally persistent at the ?rm-level only for product innovations. Finally, the empirical findings reveal that these technological innovations have a positive effect on firm’s productivity.     

Environmental regulations,induced R&D,and productivity: Evidence from Taiwan's manufacturing industries

This paper examines whether stringent environmental regulations induce more R&D and promote further productivity in Taiwan. Using an industry-level panel dataset for the 1997–2003 period, empirical results show that pollution abatement fees, a proxy for environmental regulations, is positively related to R&D expenditure, implying that stronger environment protection induces more R&D. On the other hand, pollution abatement capital expenditures do not have a statistically significant influence on R&D. Further evaluation of the influence of induced R&D by environment regulations on industrial productivity shows a significant positive association between them. This finding supports the Porter hypothesis that more stringent environmental regulations may enhance rather than lower industrial competitiveness.     

Assessing the nonlinear nature of the effects of R&D intensity on growth of SMEs: a dynamic panel data approach

Based on a sample of Portuguese SMEs for the period 1999–2006 and using two step estimation, namely probit regressions and dynamic estimators, this study makes two important contributions to the literature: (i) identification of a quadratic relationship between R&D intensity and SME growth that takes the form of a U, and so R&D intensity is a stimulating factor of SME growth for high levels of R&D intensity; being a restrictive factor of SME growth for low levels of R&D intensity; and (ii) the growth of SMEs seems to be dependent on the nonlinear effects associated with distinct levels of R&D intensity. The nonlinear effects identified suggest that Portuguese SMEs with high levels of R&D intensity more easily find an efficiency scale and are more dependent on internal financing and short-term debt as sources for funding growth, compared to the case of Portuguese SMEs with lower levels of R&D intensity.     

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.     

R&D spillovers and employment: evidence from European patent data

In this paper we investigate the role of patents in the relationship between R&D activity, spillovers and employment at the firm level. A reduced-form labour demand equation is estimated. Our analysis is based upon a dataset consisting of 879 R&D-intensive manufacturing firms worldwide for which information was collected for the period 2002–2010. We use data from all EU R&D investment scoreboard editions issued every year until 2011 by the JRC-IPTS (scoreboards). Since the innovation output of the industrial strategy of every firm is the number of patents, the main contribution to the existing literature is to investigate also the impact of patents/R&D ratio and patents/spillovers ratio on employment level. The empirical results suggest a significant impact of R&D spillover effects on company employment although the results differ substantially according to the spillover stock, which may considerably affect policy implications.     

Impact of R&D expenditures,rainfall and temperature variations in agricultural productivity: empirical evidence from Bangladesh

ABSTRACT

This study aims to investigate dynamic relationships between research and development (R&D) expenditure, climate change (measured by annual rainfall and temperature variations), human capital (proxied by literacy) and total factor productivity (TFP) growth in Bangladesh agriculture. Pesaran’s Pooled Mean Group (PMG) estimator is used to a unique panel data of 17 regions of Bangladesh covering a 61-year period (1948–2008). In addition, the panel vector autoregression (PVAR) model is also applied to trace the responsiveness of TFP from a shock to R&D, extension services, and literacy rate. Results reveal that R&D has an insignificant impact on TFP in the short-run, while it has a significant positive impact in the long-run. The contributions of climate variables (i.e., rainfall and temperature variations) are highly significant and negative in the long run. The literacy rate is found to have a significant positive impact on TFP as expected. These results suggest that agricultural R&D investment and human capital could play an important role to ameliorate the adverse effects of climate change in the agricultural sector of Bangladesh.     

The impact of corporate debt on long term investment and firm performance

Prior research indicates a linkage between debt, research and development (R&D) and physical investment, and that the relationship varies depending on the type of firm (science versus non–science). Leverage also plays a multidimensional role in corporate performance and growth. The relationship between financial leverage and R&D expenditure is analysed using a sample of large United States (US) manufacturing firms. Then, the impact of leverage on R&D expenditure is studied using corporate performance drivers as intermediate variables. The results indicate that there is a strong negative relationship between the degree of financial leverage and the level of R&D expenditure that firms undertake. The negative relationship is robust to changes in model specifications and sample periods. More importantly, the results show that it is higher leverage that leads to lower R&D expense rather than R&D causing variations in future leverage. In addition, the results indicate that higher leverage adversely influences future investment in R&D which may in turn lead to negative impact on long term operating performance and future growth opportunities.     

Testing for the Ratchet Effect in the R&D Tax Credit

Many countries have implemented the R&D tax credit to encourage firms’ R&D spending. The design of the tax credit is important for its effectiveness. Some countries such as Korea, Taiwan, Japan, France and the US have employed an incremental R&D tax credit system. The US case that made a major change in its design from the moving average base to the fixed base in calculating the credit provides us with a natural experiment to measure the effectiveness of the tax credit from the perspective of the ratchet effect. By applying an endogenous switching regression model to US manufacturing firm data, we attempt to measure the ratchet effect of R&D credit on firms’ R&D investment. According to the empirical results, the R&D tax credit policy has been effective with the price elasticity, –1.818, for the qualified firms, and the re-design of R&D credit improved the positive impact of R&D credit. This provides some policy implication for those countries that adopted an incremental credit system. In addition, our result suggests the existence of selectivity bias in the previous literature.     

Innovation,exports, productivity and investment climate; a study based on Indian manufacturing firm-level data

In this paper, we use univariate instrumental estimations to study the interactions between firm-level innovation, exports and productivity in the Indian manufacturing sector. To differentiate incentives to innovate from the ability to innovate, we distinguish the inputs of innovation (R&D and training) from the outputs. Our findings highlight a virtuous circle between the three components of innovation, as well as between firms’ R&D, innovation and exports. The productivity of Indian manufacturing firms is benefiting from this dynamics, as exports and innovation improve firms’ TFP. With respect to the investment climate, our results suggest that differences in the environment of Indian companies contribute to their performance gaps. These results are all the more important in the context of the Make in India campaign and the weaknesses of India’s business environment.     

Inter-Firm Technological Cooperation: Effects Of Absorptive Capacity,Firm-Size And Specialization

This paper aims to add evidence on the role played by firms' technological competencies in the determination of their intensity of cooperation with other firms. Using a database composed by patents jointly filcd by two or more firms in the European Patent Office, the paper confronts the hypotheses of complementary or substitutive character of technological cooperation in relation to intra-mural R&D. The results suggest that more technologically and productive specialized firms are more likely to cooperate and find no support for the hypothesis that greater level of R&D expenditure will induce greater reliance on technological cooperation. It is also suggested that firms cooperate with partners that hold cotilplenientary competencies.     

In-house R&D,external R&D and cooperation breadth in Spanish manufacturing firms: is there a synergistic effect on innovation outputs?

ABSTRACT

This study explores the nature of relationship between in-house R&D, external R&D and cooperation breadth and their joint impact on patent counts as well as technological, product and process, innovations in Spanish manufacturing firms. With regards to patent counts, empirical findings from a Generalized Method of Moments (GMM) estimator suggest a complementarity effect of internal and external R&D activities conditional on the breadth of R&D cooperation. Concerning technological innovation, results from dynamic random-effects probit models indicate no synergistic effects. In addition, we find evidence of persistence of all three innovation output measures. Our results suggest policy implications in relation to strengthening firms’ absorptive capacity that could have long-run effects.