The Impact of Firm’s R&D Strategy on Profit and Productivity
AbstractThis paper investigates how a firm’s R&D strategy influences the firm performance as measured by productivity and profitability. A formal production model is introduced to define and interpret alternative ways of measuring the impact of R&D. Studying 1,767 randomly selected firms from the Swedish manufacturing sector, the main findings are: (i) firms which apply persistent R&D perform better than firms with occasional as well as no R&D, (ii) occasional R&D is associated with lower performance than no R&D, and (iii) in quantile regressions the positive effect from R&D persistency is lacking for low productivity firms (lowest quartile) indicating a non-linear response. Moreover, the analysis recognises the different roles of ordinary and knowledge labour in production when specifying alternative performance measures and when identifying knowledge labour as a firm’s R&D capacity, which has a highly significant impact on firm performance. Introducing a formal production model in order to define and interpret alternative ways of measuring the impact of R&D, we apply simple ordinary OLS and quantile regressions on the economic model for analyzing the importance for a particular R&D strategy on firms’ productivity and profitability. To the best of our knowledge, we believe that the main findings of the analysis make contributions to the R&D literature.
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Bibliographic InfoPaper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 156.
Length: 28 pages
Date of creation: 03 Dec 2008
Date of revision:
Contact details of provider:
Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
Web page: http://www.infra.kth.se/cesis/
More information through EDIRC
R&D; productivity; profit; innovation; production analysis;
Find related papers by JEL classification:
- L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-07 (All new papers)
- NEP-BEC-2008-12-07 (Business Economics)
- NEP-CSE-2008-12-07 (Economics of Strategic Management)
- NEP-EFF-2008-12-07 (Efficiency & Productivity)
- NEP-INO-2008-12-07 (Innovation)
- NEP-IPR-2008-12-07 (Intellectual Property Rights)
- NEP-KNM-2008-12-07 (Knowledge Management & Knowledge Economy)
- NEP-MIC-2008-12-07 (Microeconomics)
- NEP-TID-2008-12-07 (Technology & Industrial Dynamics)
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