Firm size,university based research,and the returns to R&D

This paper compares university-based research relationships between small and large firms as an explanation for the difference in innovative activity across firm sizes. We test the hypothesis that there are diseconomies of scale in producing innovations in large firms due to the inherent bureaucratization process which inhibits both innovative activity as well as the speed with which new inventions move through the corporate system towards the market. By utilizing university-based research relationships, small firms are able to avoid bureaucratic inefficiencies.