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Firm Growth and R&D Expenditure Author info | Abstract | Publisher info | Download info | Related research | Statistics Alexander Coad ()
Rekha Rao
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We apply a panel vector autoregression model to a firm-level longitudinal database to observe the co-evolution of sales growth, employment growth, profits growth and growth of R&D expenditure. Contrary to expectations, profit growth seems to have little detectable effect on R&D investment. Instead, firms appear to increase their total R&D expenditure following growth in sales and growth of employment. In a sense, firms behave ‘as if’ they aim for a roughly constant ratio of R&D to employment (or sales). We observe heterogeneous effects for growing or shrinking firms however, suggesting that firms are less willing to reduce their R&D levels following a negative growth shock than they are willing to increase R&D after a positive shock.
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Paper provided by Max Planck Institute of Economics, Evolutionary Economics Group in its series Papers on Economics and Evolution with number
2007-10.
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Date of creation: Nov 2007Date of revision:
Handle: RePEc:esi:evopap:2007-10Contact details of provider: Postal: Kahlaische Strasse 10, D-07745 Jena Phone: +49-3641-68 65 Fax: +49-3641-68 69 90 Web page: http://www.econ.mpg.de/ More information through EDIRC
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Keywords: Firm Growth ; Panel VAR ; R&D expenditure ; Industrial Dynamics Length 32 pages ; Other versions of this item:
Find related papers by JEL classification: L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
This paper has been announced in the following NEP Reports :
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Alex Coad, 2006.
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LEM Papers Series
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r07008, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
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Giulio Bottazzi & Alex Coad & Nadia Jacoby & Angelo Secchi, 2005.
"Corporate Growth and Industrial Dynamics: Evidence from French Manufacturing ,"
LEM Papers Series
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"Vector Autoregressions ,"
Journal of Economic Perspectives ,
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Alex Coad & Rekha Rao, 2006.
"Innovation and market value: a quantile regression analysis ,"
Economics Bulletin ,
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Binder, Michael & Hsiao, Cheng & Pesaran, M. Hashem, 2005.
"Estimation And Inference In Short Panel Vector Autoregressions With Unit Roots And Cointegration ,"
Econometric Theory ,
Cambridge University Press, vol. 21(04), pages 795-837, August.
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Michael Binder & Cheng Hsiao & M. Hashem Pesaran, 2000.
"Estimation and Inference In Short Panel Vector Autoregressions with Unit Roots And Cointegration ,"
CESifo Working Paper Series
CESifo Working Paper No. , CESifo Group Munich.
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Cambridge Working Papers in Economics
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CEMI Working Papers
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Spiros Bougheas & Holger Görg & Eric Strobl, 2003.
"Is R & D Financially Constrained? Theory and Evidence from Irish Manufacturing ,"
Review of Industrial Organization ,
Springer, vol. 22(2), pages 159-174, March.
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Alex Coad, 2007.
"Exploring the "mechanics" of firm growth : evidence from a short-panel VAR ,"
Documents de travail du Centre d'Economie de la Sorbonne
r07037, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
[Downloadable!]
Henry Grabowski & John Vernon, 2000.
"The determinants of pharmaceutical research and development expenditures ,"
Journal of Evolutionary Economics ,
Springer, vol. 10(1), pages 201-215.
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Geroski, Paul A, 1999.
"The Growth of Firms in Theory and in Practice ,"
CEPR Discussion Papers
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Alessio Moneta, 2005.
"Causality in macroeconometrics: some considerations about reductionism and realism ,"
Journal of Economic Methodology ,
Taylor and Francis Journals, vol. 12(3), pages 433-453, September.
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George Symeonidis, 1996.
"Innovation, Firm Size and Market Structure: Schumpeterian Hypotheses and Some New Themes ,"
OECD Economics Department Working Papers
161, OECD, Economics Department.
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Blundell, Richard & Bond, Stephen, 1998.
"Initial conditions and moment restrictions in dynamic panel data models ,"
Journal of Econometrics ,
Elsevier, vol. 87(1), pages 115-143, August.
[Downloadable!] (restricted)
Other versions:
Richard Blundell & Steve Bond, 1995.
"Initial conditions and moment restrictions in dynamic panel data models ,"
IFS Working Papers
W95/17, Institute for Fiscal Studies.
Blundell, R. & Bond, S., 1995.
"Initial Conditions and Moment Restrictions in Dynamic Panel Data Models ,"
Economics Papers
104, Economics Group, Nuffield College, University of Oxford.
R Blundell & Steven Bond, .
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Economics Papers
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[Downloadable!] Kaplan, Steven N & Zingales, Luigi, 1997.
"Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 112(1), pages 169-215, February.
Alex Coad & Rekha Rao, 2006.
"Innovation and Firm Growth in High-Tech Sectors: A Quantile Regression Approach ,"
LEM Papers Series
2006/18, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
[Downloadable!]
Other versions:
Alex Coad & Rekha Rao, 2007.
"Innovation and Firm Growth in High-Tech Sectors: A Quantile Regression Approach ,"
Open Discussion Papers in Economics
57, The Open University, Faculty of Social Sciences, Department of Economics.
Coad, Alex & Rao, Rekha, 2008.
"Innovation and firm growth in high-tech sectors: A quantile regression approach ,"
Research Policy ,
Elsevier, vol. 37(4), pages 633-648, May.
[Downloadable!] (restricted) Nickell, Stephen J, 1981.
"Biases in Dynamic Models with Fixed Effects ,"
Econometrica ,
Econometric Society, vol. 49(6), pages 1417-26, November.
[Downloadable!] (restricted)
Holger Gorg & Eric Strobl, 2007.
"The Effect of R&D Subsidies on Private R&D ,"
Economica ,
London School of Economics and Political Science, vol. 74(294), pages 215-234, 05.
[Downloadable!] (restricted)
Hall, Bronwyn & Van Reenen, John, 2000.
"How effective are fiscal incentives for R&D? A review of the evidence ,"
Research Policy ,
Elsevier, vol. 29(4-5), pages 449-469, April.
[Downloadable!] (restricted)
U. Witt & C. Zellner, 2005.
"Knowledge-based Entrepreneurship: The Organizational Side of Technology Commercialization ,"
Papers on Economics and Evolution
2005-04, Max Planck Institute of Economics, Evolutionary Economics Group.
Alex Coad, 2005.
"Testing the principle of 'growth of the fitter': The relationship between profits and firm growth ,"
Emory Economics
0531, Department of Economics, Emory University (Atlanta).
[Downloadable!]
Other versions: Roger Koenker & Kevin F. Hallock, 2001.
"Quantile Regression ,"
Journal of Economic Perspectives ,
American Economic Association, vol. 15(4), pages 143-156, Fall.
[Downloadable!] (restricted)
Bronwyn H. HALL & Raffaele ORIANI, 2004.
"Does the Market Value R&D Investment by European Firms? Evidence from a Panel of Manufacturing Firms in France ,"
Economics Working Papers
ECO2004/13, European University Institute.
[Downloadable!]
Delmar, Frederic & Davidsson, Per & Gartner, William B., 2003.
"Arriving at the high-growth firm ,"
Journal of Business Venturing ,
Elsevier, vol. 18(2), pages 189-216, March.
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Joao Pedro Azevedo, 2004.
"GRQREG: Stata module to graph the coefficients of a quantile regression ,"
Statistical Software Components
S437001, Boston College Department of Economics, revised 01 Jan 2006.
[Downloadable!]
Alex Coad, 2007.
"Neoclassical vs Evolutionary Theories of Financial Constraints : Critique and Prospectus ,"
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers)
halshs-00144415_v1, HAL.
[Downloadable!]
Dominique Guellec & Bruno Van Pottelsberghe, 2000.
"The Impact of Public R&D Expenditure on Business R&D ,"
OECD Science, Technology and Industry Working Papers
2000/4, OECD, Directorate for Science, Technology and Industry.
[Downloadable!]
Other versions:
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Werner Hölzl, 2009.
"Is the R&D behaviour of fast-growing SMEs different? Evidence from CIS III data for 16 countries ,"
Small Business Economics ,
Springer, vol. 33(1), pages 59-75, June.
[Downloadable!] (restricted)
Other versions: Alexander Coad, 2007.
"Disentangling the firm growth process: evidence from a recursive panel VAR ,"
Papers on Economics and Evolution
2007-15, Max Planck Institute of Economics, Evolutionary Economics Group.
[Downloadable!]
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