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Corporate R&D and firm efficiency: Evidence from Europe’s top R&D investors

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Abstract

The main objective of this study is to investigate the impact of corporate R&D activities on firm performance, measured by labour productivity. To this end, the stochastic frontier technique is used on a unique unbalanced longitudinal dataset on top European R&D investors over the period 2000–2005. The study quantifies technical inefficiency of individual firms. From a policy perspective, the results of this study suggest that – if the aim is to leverage firms’ productivity – emphasis should be put on supporting corporate R&D in high-tech sectors and, to some ex-tent, in medium-tech sectors. On the other hand, corporate R&D in the low-tech sector is found to have a minor effect in explaining productivity. Instead, encouraging investment in fixed assets appears important for the productivity of low-tech industries. Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an ‘erga omnes’ approach across all sectors appears inappropriate. However, with regard to technical efficiency, R&D intensity is found to be a pivotal factor in explaining firm efficiency. This is true for all industries.

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Paper provided by Institute of Prospective Technological Studies, Joint Research Centre in its series JRC-IPTS Working Papers on Corporate R&D and Innovation with number 2010-11.

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Length: 29 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:ipt:wpaper:201011

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Keywords: Corporate R&D; productivity; technical efficiency; stochastic frontier analysis;

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Citations

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Cited by:
  1. Kumbhakar, Subal C. & Ortega-Argilés, Raquel & Potters, Lesley & Vivarelli, Marco & Voigt, Peter, 2009. "Corporate R&D and Firm Efficiency: Evidence from Europe’s Top R&D Investors," IZA Discussion Papers 4657, Institute for the Study of Labor (IZA).
  2. Pisa, M. Isabel & Sánchez, Rosario, 2013. "Work incentive and productivity in Spain," MPRA Paper 46487, University Library of Munich, Germany.
  3. d'Artis Kancs & Boriss Siliverstovs, 2012. "R&D and Non-linear Productivity Growth of Heterogeneous Firms," LICOS Discussion Papers, LICOS - Centre for Institutions and Economic Performance, KU Leuven 32112, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  4. Letizia Montinari & Michael Rochlitz, 2012. "Absorptive Capacity and Efficiency: A Comparative Stochastic Frontier Approach Using Sectoral Data," Working Papers, IMT Institute for Advanced Studies Lucca 4/2012, IMT Institute for Advanced Studies Lucca, revised Jun 2012.
  5. Rosario SÁNCHEZ-PÉREZ & M. Ángeles DÍAZ-MAYANS, 2013. "Are Large Innovative Firms More Efficient?," Theoretical and Practical Research in Economic Fields, ASERS Publishing, ASERS Publishing, vol. 0(1), pages 89-96, July.
  6. repec:ial:wpaper:4 is not listed on IDEAS
  7. Antonio Vezzani & Sandro Montresor, 2013. "The production function of top R&D investors: Accounting for size and sector heterogeneity with quantile estimations," JRC-IPTS Working Papers on Corporate R&D and Innovation, Institute of Prospective Technological Studies, Joint Research Centre 2013-02, Institute of Prospective Technological Studies, Joint Research Centre.
  8. Pietro Moncada-Paterno-Castello & Peter Voigt, 2013. "The effect of innovative SMEs' growth to the structural renewal of the EU economy - A projection to the year 2020 –," JRC-IPTS Working Papers JRC83400, Institute for Prospective and Technological Studies, Joint Research Centre.
  9. Diaz-Mayans, M.Angeles & Sánchez, Rosario/R, 2014. "Innovation, exports and technical efficiency in Spain," MPRA Paper 53230, University Library of Munich, Germany.
  10. Paulo Nunes & Marco Gonçalves & Zélia Serrasqueiro, 2013. "The influence of age on SMEs’ growth determinants: empirical evidence," Small Business Economics, Springer, Springer, vol. 40(2), pages 249-272, February.

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