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The Span of the Effect of R&D in the Firm and Industry

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  • James D Adams
  • Adam B Jaffe

Abstract

Previous studies have found that the firm's own research and spillovers of research by related firms increase firm productivity. In contrast, in this paper we explore the impact of firm R&D on the productivity of its individual plants. We carry out this investigation of within firm R&D effects using a unique set of Census data. The data, which are from the chemicals industry, are a match of plant level productivity and other characteristics with firm level data on R&D of the parent company, cross-classified by location and applied product field. We explore three aspects of the span of effect of the firm's R&D: (i), the degree to which its R&D is "public" across plants; (ii), the extent of its localization in geographic space, and (iii), the breadth of its relevance outside the applied product area in which it is classified. We find that (i), firm R&D acts more like a private input which is strongly amortized by the number of plants in the firm; (ii), firm R&D is geographically localized, and exerts greater influence on productivity when it is conducted nearer to the plant; and (iii), firm R&D in a given applied product area is of limited relevance to plants producing outside that product area. Moreover, we find that while geographic localization remains significant, it diminishes over time. This trend is consistent with the effect of improved telecommunications on increased information flows within organizations. Finally, we consider spillovers of R&D from the rest of industry, finding that the marginal product of industry R&D on plant productivity, though positive and significant, is far smaller than the marginal product of parent firm's R&D.

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File URL: ftp://ftp2.census.gov/ces/wp/1994/CES-WP-94-07.pdf
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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 94-7.

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Date of creation: May 1994
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Handle: RePEc:cen:wpaper:94-7

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Keywords: CES; economic; research; micro; data; microdata; chief; economist;

References

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  1. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring.
  2. McAfee, R. Preston & McMillan, John., 1990. "Organizational Diseconomies of Scale," Working Papers 728, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  4. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  5. Dearden, James & Ickes, Barry W & Samuelson, Larry, 1990. "To Innovate or Not to Innovate: Incentives and Innovation in Hierarchies," American Economic Review, American Economic Association, vol. 80(5), pages 1105-24, December.
  6. Zvi Griliches, 1991. "The Search for R&D Spillovers," NBER Working Papers 3768, National Bureau of Economic Research, Inc.
  7. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
  8. Michael Keren & David Levhari, 1983. "The Internal Organization of the Firm and the Shape of Average Costs," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 474-486, Autumn.
  9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  10. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-21, January.
  11. Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133 Elsevier.
  12. Jaffe, Adam B, 1989. "Real Effects of Academic Research," American Economic Review, American Economic Association, vol. 79(5), pages 957-70, December.
  13. Calvo, Guillermo A & Wellisz, Stanislaw, 1978. "Supervision, Loss of Control, and the Optimum Size of the Firm," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 943-52, October.
  14. Oliver E. Williamson, 1967. "Hierarchical Control and Optimum Firm Size," Journal of Political Economy, University of Chicago Press, vol. 75, pages 123.
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Citations

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Cited by:
  1. Timothy Dunne & John Haltiwanger & Kenneth R. Troske, 1996. "Technology and Jobs: Secular Changes and Cyclical Dynamics," NBER Working Papers 5656, National Bureau of Economic Research, Inc.
  2. Harabi, Najib, 1995. "Channels of R&D Spillovers: An Empirical Investigation," MPRA Paper 26270, University Library of Munich, Germany.
  3. Ollinger, Michael & Fernandez-Cornejo, Jorge, 1998. "Innovation And Regulation In The Pesticide Industry," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 27(1), April.
  4. Jim Bessen, 1997. "Productivity Adjustments and Learning-by-Doing as Human Capital," Working Papers 97-17, Center for Economic Studies, U.S. Census Bureau.
  5. Lynne G. Zucker & Michael R. Darby & Jeff Armstrong, 1994. "Intellectual Capital and the Firm: The Technology of Geographically Localized Knowledge Spillovers," NBER Working Papers 4946, National Bureau of Economic Research, Inc.
  6. Lucia Foster, 1999. "Employment Adjustment Costs and Establishment Characteristics," Working Papers 99-15, Center for Economic Studies, U.S. Census Bureau.
  7. Basevi, Giorgio & Ottaviano, Gianmarco Ireo Paolo, 2001. "The District and the Global Economy: Exporting versus Foreign Location," CEPR Discussion Papers 2976, C.E.P.R. Discussion Papers.
  8. Lucia Foster & Cheryl Grim, 2010. "Characteristics of the Top R&D Performing Firms in the U.S.: Evidence from the Survey of Industrial R&D," Working Papers 10-33, Center for Economic Studies, U.S. Census Bureau.
  9. Lucia Foster, 1999. "On The Sources And Size Of Employment Adjustment Costs," Working Papers 99-7, Center for Economic Studies, U.S. Census Bureau.
  10. Ron Jarmin, 1996. "Learning by Doing and Plant Characteristics," Working Papers 96-5, Center for Economic Studies, U.S. Census Bureau.
  11. James D Adams & Suzanne Peck, 1994. "A Guide To R&D Data At The Center For Economic Studies U.S. Bureau Of THe Census," Working Papers 94-9, Center for Economic Studies, U.S. Census Bureau.
  12. William Kerr & Shihe Fu, 2008. "The survey of industrial R&D—patent database link project," The Journal of Technology Transfer, Springer, vol. 33(2), pages 173-186, April.
  13. Jurgen Essletzbichler & David Rigby, 2005. "Technological evolution as creative destruction of process heterogeneity: evidence from US plant-level data," Economic Systems Research, Taylor & Francis Journals, vol. 17(1), pages 25-45.
  14. William Kerr & Shihe Fu, 2006. "The Industry R&D Survey: Patent Database Link Project," Working Papers 06-28, Center for Economic Studies, U.S. Census Bureau.

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