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Corporate R&D and Firm Efficiency: Evidence from Europe’s Top R&D Investors

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  • Kumbhakar, Subal C.

    ()
    (Binghamton University, New York)

  • Ortega-Argilés, Raquel

    ()
    (IN+ Center for Innovation)

  • Potters, Lesley

    (Utrecht School of Economics)

  • Vivarelli, Marco

    ()
    (Università Cattolica del Sacro Cuore)

  • Voigt, Peter

    ()
    (European Commission)

Abstract

The main objective of this study is to investigate the impact of corporate R&D activities on firms' performance, measured by labour productivity. To this end, the stochastic frontier technique is applied, basing the analysis on a unique unbalanced longitudinal dataset consisting of 532 top European R&D investors over the period 2000–2005. R&D stocks are considered as pivotal input in order to control for their particular contribution to firm-level efficiency. Conceptually, the study quantifies the technical inefficiency of a given company and tests empirically whether R&D activities could explain the distance from the efficient boundary of the production possibility set, i.e. the production frontier. From a policy perspective, the results of this study suggest that – if the aim is to leverage companies' productivity – emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. By contrast, supporting corporate R&D in the low-tech sector turns out to have a minor effect. Instead, encouraging investment in fixed assets appears vital for the productivity of low-tech industries. However, with regard to firms' technical efficiency, R&D matters for all industries (unlike capital intensity). 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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4657.

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Length: 31 pages
Date of creation: Dec 2009
Date of revision:
Publication status: published in: Journal of Productivity Analysis, 2012, 37, 125-140
Handle: RePEc:iza:izadps:dp4657

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

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Cited by:
  1. Subal C. Kumbhakar & Raquel Ortega-Argilés & Lesley Potters & Marco Vivarelli & Peter Voigt, 2010. "Corporate R&D and firm efficiency: Evidence from Europe’s top R&D investors," JRC-IPTS Working Papers on Corporate R&D and Innovation, Institute of Prospective Technological Studies, Joint Research Centre 2010-11, Institute of Prospective Technological Studies, Joint Research Centre.
  2. 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.
  3. Diaz-Mayans, M.Angeles & Sánchez, Rosario/R, 2014. "Innovation, exports and technical efficiency in Spain," MPRA Paper 53230, University Library of Munich, Germany.
  4. 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.
  5. 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.
  6. 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.
  7. repec:ial:wpaper:4 is not listed on IDEAS
  8. Pisa, M. Isabel & Sánchez, Rosario, 2013. "Work incentive and productivity in Spain," MPRA Paper 46487, University Library of Munich, Germany.
  9. Sánchez, Rosario/R & Diaz, M. Angeles, 2013. "Are large innovative firms more efficient?," MPRA Paper 44592, University Library of Munich, Germany.
  10. 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, Institute for Prospective and Technological Studies, Joint Research Centre JRC83400, Institute for Prospective and Technological Studies, Joint Research Centre.

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