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Innovation, Firm Size, and R&D Search

Author

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  • Jose Plehn-Dujowich

    (University at Buffalo)

Abstract

We present evidence that small firms perform two to four times more innovations per dollar of R&D than large firms. We propose a search theory of R&D that accounts for the evidence. A firm incurs R&D expenses until it has discovered a level of R&D productivity that is sufficiently great to warrant stopping the search. We show that because the large number of R&D projects run by a large firm becomes a substitute for enhanced R&D productivity, the average R&D productivity of a firm is decreasing in firm size.

Suggested Citation

  • Jose Plehn-Dujowich, 2007. "Innovation, Firm Size, and R&D Search," Economics Bulletin, AccessEcon, vol. 12(18), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-07l20007
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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume12/EB-07L20007A.pdf
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    References listed on IDEAS

    as
    1. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
    2. John Bound & Clint Cummins & Zvi Griliches & Bronwyn H. Hall & Adam B. Jaffe, 1984. "Who Does R&D and Who Patents?," NBER Chapters, in: R&D, Patents, and Productivity, pages 21-54, National Bureau of Economic Research, Inc.
    3. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
    4. Zvi Griliches, 1984. "R&D, Patents, and Productivity," NBER Books, National Bureau of Economic Research, Inc, number gril84-1, July.
    5. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
    6. Holmström, Bengt, 1989. "Agency Costs and Innovation," Working Paper Series 214, Research Institute of Industrial Economics.
    7. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-583, June.
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    Cited by:

    1. Christian Rammer & Dirk Czarnitzki & Alfred Spielkamp, 2009. "Innovation success of non-R&D-performers: substituting technology by management in SMEs," Small Business Economics, Springer, vol. 33(1), pages 35-58, June.

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    More about this item

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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