CDM using a cross-country micro moments database†

ABSTRACT

This note starts with a retrospective view of the CDM model [Crépon, Bruno, Emmanuel Duguet, and Jacques Mairesse. 1998. “Research, Innovation and Productivity: An Econometric Analysis at the Firm Level.” Economics of Innovation and New Technology 7 (2): 115–158.] as an econometric framework for studying innovation and growth. A narrative interpretation of CDM describes the chain from innovative activity at firms to increases in welfare and makes links to the policy environment. Filling in missing pieces of the innovation to productivity puzzle has a heavy data burden. The paper makes use of the micro moments database (MMD) that allows observing micro-level behavior and macro-level impacts of innovation and production in a large selection of European countries. Two examples are given of research using the MMD. First, we estimate a simplified system of innovation and production equations that can be applied to average firm choices and outcomes, as well as to industry or aggregate outcomes. We find that innovative activity contributes to aggregate productivity even while the average effect at the firm level is insignificant. Next, a cross-country exploration is made that shows heightened productivity effects of combined use by firms of various enterprise-level information and communications technologies.     

R&D strategy and innovation performance: the role of standardization

Firms now increasingly recognise the important role of R&D strategy in building technological advantage. However, few attempts have linked standardisation with specific R&D strategies in explaining innovation performance. To bridge this gap, this study empirically examines the relationships between R&D strategies, standardisation, and firms’ innovation performance. Based on a sample of 371 firms in China, we use structural equation modelling (SEM) and find that novelty-oriented R&D strategy generates greater accumulation of standardisation knowledge and standards diversity, while R&D openness only positively relates to this standardisation knowledge accumulation. Moreover, standardisation knowledge accumulation is positively related to both administrative and technical innovation performance, while a greater variety of standards only leads to higher administrative innovativeness. More importantly, our results reveal that accumulation of standardisation knowledge mediates the relationships between R&D novelty and administrative and technical innovation performances. Both the theoretical and practical implications that arise from these findings are discussed.     

A new approach to estimation of the R&D–innovation–productivity relationship

ABSTRACT

We apply a generalized structural equation model approach to the estimation of the relationship between R&D, innovation and productivity that focuses on the potentially crucial heterogeneity across sectors. The model accounts for selectivity and handles the endogeneity of this relationship in a recursive framework which allows for feedback effects from productivity to future R&D investment. Our approach enables the estimation of the different equations as one system, allowing the coefficients to differ across sectors, and also permits us to take cross-equation correlation of the errors into account. Employing a panel of Swedish manufacturing and service firms observed in three consecutive Community Innovation Surveys in the period 2008–2012, our full-information maximum likelihood estimates show that many key channels of influence among the model's components vary meaningfully in their statistical significance and magnitude across six different sectors based on the OECD classification on technological and knowledge intensity. These results cast doubt on earlier research which does not allow for sectoral heterogeneity.     

Dynamic R&D choice and the impact of the firm's financial strength

ABSTRACT

This article investigates how a firm's financial strength affects its dynamic decision to invest in R&D. We estimate a dynamic model of R&D choice using data for German firms in high-tech manufacturing industries. The model incorporates a measure of the firm's financial strength, derived from its credit rating, which is shown to lead to substantial differences in estimates of the costs and expected long-run benefits from R&D investment. Financially strong firms have a higher probability of generating innovations from their R&D investment, and the innovations have a larger impact on productivity and profits. Averaging across all firms, the long-run benefit of investing in R&D equals 6.6% of firm value. It ranges from 11.6% for firms in a strong financial position to 2.3% for firms in a weaker financial position.     

The impact of R&D subsidy on innovation: evidence from New Zealand firms

This study examines the impact of government subsidy through R&D grants on innovation output for firms in New Zealand. Using a large database that links administrative and tax data with survey data, we find that R&D grants have a stronger effect on more novel innovation (e.g. applying for a patent or introducing new products to the world) than on incremental innovation (e.g. any product innovation) and that larger, project-based grants are more effective at promoting innovation than smaller, non-project-specific grants. There is little evidence that R&D grants have differential effects between smaller (<50 employees) and larger firms.     

Assessing measurement errors in the CDM research–innovation–productivity relationships

ABSTRACT

The Crépon-Duguet-Mairesse 1998 article, known as CDM, initiated a structural econometric framework to analyze the relationships among research, innovation and productivity, which has been estimated most generally on the basis of cross-sectional innovation survey-type data. Some econometric implementations of the CDM approach have suggested that such data give useful but imprecise measures of the innovation output (share of innovative sales), and to a lesser degree of the innovation input (R&D). These ‘measurement errors’ may result in attenuation biases of the estimated R&D and innovation impact elasticities in the two basic CDM ‘roots’ relations of R&D to innovation and innovation to productivity, as well as in the extended production function à la Griliches linking directly R&D to productivity. Using a panel of three waves of the French Community Innovation Survey (CIS), we assess these biases and the magnitude of the underlying measurement errors, assuming mainly that they are ‘white noise’ errors. We do so by comparing two pairs of usual panel estimators (Total and Between) in both the cross-sectional and time dimensions of the data (Levels and Differences). We find large measurement errors on innovation output in the innovation–productivity equation, resulting in large attenuation biases in the related elasticity parameter. We also find smaller but sizeable measurement errors on R&D, with significant attenuation biases in the corresponding elasticity estimates, in the R&D–innovation equation and the extended production function. Simulations suggest that the measurement errors on innovation and R&D are unaffected by similar measurement errors on the capital variable.     

Do firms with larger patent portfolios create more new plant varieties in the US agricultural biotechnology industry?

This article is an empirical analysis of the relationship between patent ownership and variety innovation for US agricultural biotechnology firms in the years 1976–1999. Counts of new varieties include corn, soybean, or wheat varieties protected by either patents or plant variety protection certificates, while patent portfolio size is defined as the count of a firm's gene and method patents. Negative binomial regression results indicate that firms with larger patent portfolios did not exhibit scale economies in variety creation nor did firms with wider technological diversity in their patent portfolios create significantly greater numbers of new varieties. However, firms experienced positive spillover effects from rival firms’ patent ownership, and patent ownership increases this effect. Sample firms that have merged in the past do not produce significantly greater numbers of new varieties after considering an increase in portfolio size and did not experience greater economies of scale in creating new varieties compared with firms that experienced no past mergers.     

A comparative analysis of the change in R&D efficiency: a case of R&D leaders in the technology industry

This paper measures the cumulative change in research and development (R&D) efficiency of globally leading R&D companies in the technology industry. We use Data Envelopment Analysis /Malmquist index to analyse 49 such companies. The change in R&D efficiency is analysed by decomposing the Malmquist index into ‘catch-up’ and ‘frontier shift’ indices, and by comparing cumulative indices to those at the starting period. Those cumulative indices are obtained at both a firm and an industry level. Results indicate that the overall R&D efficiency of these globally leading R&D companies declined slightly during the period 2007–2013. At a firm level, this study determines in detail how the trend of each firm in R&D activities differs from other companies.     

How enterprise strategies are related to innovation and productivity change: an empirical study of Japanese manufacturing firms

This study analyzes the total factor productivity of 1067 Japanese manufacturing firms. In production estimation, we employ the directional distance function and Luenberger productivity indicator. Research and development strategy survey data are used to analyze the determinant factors related to improvements in innovation and productivity. Our results indicate that increasing technology and knowledge through a ‘black box’ process is related to an increase in productivity. Furthermore, the protection and management of production knowledge and expertise is a valid method of increasing global technical change.     

The productivity impact of R&D investment: are high-tech sectors still ahead?

Our aim is to investigate the relationship between a firm's R&D expenditures and its productivity, looking at sectoral peculiarities. We use a unique longitudinal database consisting of 1809 US and European manufacturing and service firms over the period 1990–2008. Our main findings can be summarised as follows. Consistently with previous literature, the knowledge stock has a significant positive impact on a firm's productivity. More interestingly, the coefficient turns out to be significantly larger in the R&D-user services and high-tech manufacturing sectors than in the non-high-tech manufacturing sectors. Contrary to the ‘latecomer advantage’ approach, these outcomes suggest that firms in high-tech sectors are still ahead in terms of impact on productivity of R&D investments.