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How to Increase R&D in Transition Economies? Evidence from Slovenia

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  • Polona Domadenik
  • Janez Prasnikar
  • Jan Svejnar

Abstract

The recent initiative of the European Union Lisbon Agenda to increase levels of R&D investment is addressed by studying the determinants of R&D investment in one of the recent EU entrants, Slovenia. Previous empirical literature-mainly cross-sectional in nature-has tested the demand-pull hypothesis and found that overall R&D expenses may be driven by output demand. We use a panel of more than 150 of the largest Slovene firms over the period 1996-2000, modeling firms' R&D behavior within an error-correction framework and estimating it in a system GMM specification. While we find that sales have a significant role in inducing R&D expenditures, we also show that the availability of internal funds and wage bargaining represent important factors determining R&D expenses. Moreover, firms owned by insiders (workers and/or managers) and/or firms with dispersed ownership (small shareholders) display higher R&D investments than firms owned by privatization investment funds or by other firms. Copyright © 2008 The Authors; Journal compilation © 2008 Blackwell Publishing Ltd.

Suggested Citation

  • Polona Domadenik & Janez Prasnikar & Jan Svejnar, 2008. "How to Increase R&D in Transition Economies? Evidence from Slovenia," Review of Development Economics, Wiley Blackwell, vol. 12(1), pages 193-208, February.
  • Handle: RePEc:bla:rdevec:v:12:y:2008:i:1:p:193-208
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    References listed on IDEAS

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    Cited by:

    1. Hashi, Iraj & Stojčić, Nebojša, 2013. "The impact of innovation activities on firm performance using a multi-stage model: Evidence from the Community Innovation Survey 4," Research Policy, Elsevier, pages 353-366.
    2. Iraj Hashi & Nebojsa Stojcic, 2010. "The Impact of innovation activities on firm performance using a multi-stage model: evidence from the Community Innovation Survey 4," CASE Network Studies and Analyses 410, CASE-Center for Social and Economic Research.
    3. Álvarez, Inmaculada C. & Kao, Chihwa & Romero-Jordán, Desiderio, 2016. "Long run effect of public grants on the R&D investment: A non-stationary panel data approach," Efficiency Series Papers 2016/04, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).

    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • P2 - Economic Systems - - Socialist Systems and Transition Economies

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