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Relation of Firm Size to R&D Productivity

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  • Gerald Marschke
  • Jinyoung Kim
  • Sangjoon John Lee

Abstract

Many studies have shown that small firms generate more patents per R&D dollar than large firms. Does this mean that small firms are more efficient innovators than large firms? In this paper we exploit a unique data set to reexamine the firm size-innovation relationship. Because firm-reported R&D expenditures may be a biased measure of R&D activities due to under-reporting by small firms, we use the number of inventors in the firm's employ as a measure of R&D inputs. We focus on the pharmaceutical and semiconductor industries, two industries that are prolific generators of homogenous innovations. As has been found elsewhere in the literature, we find that patents per R&D dollar decline with firm size for both industries. This contrasts with the relationship between patents per inventor and firm size. The average number of patents per inventor increases with size in the semiconductor industry. In the pharmaceutical industry, we show no relationship between the number of patents produced per inventor and firm size.

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Bibliographic Info

Paper provided by University at Albany, SUNY, Department of Economics in its series Discussion Papers with number 04-05.

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Date of creation: 2004
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Handle: RePEc:nya:albaec:04-05

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Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
Phone: (518) 442-4735
Fax: (518) 442-4736

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Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
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Web: http://www.albany.edu/economics/research/workingp/index.shtml

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Keywords: Patents; Innovation; Labor productivity; Research; Firm size;

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References

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  1. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
  2. Tsai, Kuen-Hung & Wang, Jiann-Chyuan, 2005. "Does R&D performance decline with firm size?--A re-examination in terms of elasticity," Research Policy, Elsevier, Elsevier, vol. 34(6), pages 966-976, August.
  3. Cameron, A Colin & Trivedi, Pravin K, 1986. "Econometric Models Based on Count Data: Comparisons and Applications of Some Estimators and Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 1(1), pages 29-53, January.
  4. Wesley M Cohen & Richard R Nelson & John P Walsh, 2003. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (Or Not)," Levine's Working Paper Archive 618897000000000624, David K. Levine.
  5. Sangjoon Lee & Jinyoung Kim, 2004. "Research Scientist Productivity and Firm Size: Evidence from Panel Data on Inventors," Econometric Society 2004 Far Eastern Meetings, Econometric Society 465, Econometric Society.
  6. Xulia González & Jordi Jaumandreu, . "Threshold effects in product R&D decisions: theoretical framework and empirical analysis," Studies on the Spanish Economy 78, FEDEA.
  7. Cohen, Wesley M & Klepper, Steven, 1996. "A Reprise of Size and R&D," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(437), pages 925-51, July.
  8. Zoltan Acs & David Audretsch, 1990. "Innovation and Small Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011131, December.
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Citations

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Cited by:
  1. Antonio Revilla & Zulima Fernández, 2013. "Environmental Dynamism, Firm Size and the Economic Productivity of R&D," Industry and Innovation, Taylor & Francis Journals, Taylor & Francis Journals, vol. 20(6), pages 503-522, August.
  2. Jinyoung Kim & Sangjoon John Lee & Gerald Marschke, 2007. "Research Scientist Productivity and Firm Size: Evidence from Panel Data on Inventors," Discussion Paper Series 0708, Institute of Economic Research, Korea University.
  3. Christian Rammer & Dirk Czarnitzki & Alfred Spielkamp, 2009. "Innovation success of non-R&D-performers: substituting technology by management in SMEs," Small Business Economics, Springer, Springer, vol. 33(1), pages 35-58, June.
  4. Seong-Sang Lee & Yeonbae Kim, 2009. "The Impact of Efficiency Parameters on Firms Innovative Activities: Evidence from Korean Firm-level data," TEMEP Discussion Papers 200924, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Nov 2009.
  5. Frosch, Katharina & Tivig, Thusnelda, 2007. "Age, human capital and the geography of innovation," Thuenen-Series of Applied Economic Theory 71, University of Rostock, Institute of Economics.

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