Purposive Diversification of R and D in Manufacturing

R&D diversification in large U.S. manufacturing firms is found to be purposive, exploiting complementarities of research activities and forming groups of related industry categories. Purposively divers ified firms behave differently from randomly diversified or undiversi fied firms. The behavioral differences result because the purposively diversified firms allocate relatively more R&D funds to industry cat egories where appropriation of the returns from R&D is relatively eas y. R&D expenditure and productivity are more closely linked at the gr oup level than at the industry-category level, suggesting spillovers across industry categories are important. Copyright 1987 by Blackwell Publishing Ltd.