What Governs Firm-Level R&D: Internal or External Factors?
AbstractTwo parallel streams of research investigating the determinants of corporate R&D exist: one from economics and the other from management. The economists' variables tend to reflect the firm's external environment while the explanatory variables used by management scientists are commonly internal to the firm. This paper combines both approaches to test for the relative importance of each type of factor using firm-level data on large Australian companies from 1990 to 2005. Our evidence suggests that most of a firm's R&D activity can be explained by time-invariant factors which we believe relate to internal and specific characteristics such as the firm's managerial style, competitive strategy and how it communicates with employees. Of the remaining time-varying portion, we find that past profits, the rate of growth of the industry and the level of R&D activity over the firm's industry is pertinent. These results are suggestive since we cannot clearly identify the extent to which the firm's internal behaviour is conditioned by its external environment.
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Bibliographic InfoPaper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2009n13.
Length: 28 pages
Date of creation: May 2009
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-11 (All new papers)
- NEP-CSE-2009-07-11 (Economics of Strategic Management)
- NEP-INO-2009-07-11 (Innovation)
- NEP-SBM-2009-07-11 (Small Business Management)
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