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The Impact of R&D Investments on Performance of Firms in Different Degrees of Proximity to the Technological Frontier

Author

Listed:
  • Leonardo Rocha Andrade

    (Universidade Federal Rural do Semi-Ã rido)

  • Leonardo Q. Cardenas

    (Universidade Federal Rural do Semi-Ã rido)

  • Fernando Dias Lopes

    (Universidade Federal do Rio Grande do Sul)

  • Fernando P. S. Oliveira

    (Universidade Federal Rural do Semi-Ã rido)

  • Kaio Cesar Fernandes

    (Universidade Federal Rural do Semi-Ã rido)

Abstract

This study analyzes the impact of R&D in the performance of companies from different degrees of proximity to the technological frontier. In this way, a model of endogenous growth was built, where firms operating closer to this frontier use the research resources to move it, enjoying a higher return. To test this hypothesis, we used a sample of companies with major investments in R&D in the world, according the ‘EU Industrial R&D Investment Scoreboard'. Then, an indicator that measures the degree of proximity to the frontier for each sector was built. Through the technique of regression with panel data, it was estimated an equation where the performance metrics of the company is conditioned by investments in R&D and the investment interacted with the proximity index to the frontiers. Thus, the impact of investments in performance is represented by two important vectors of influence: (1) the average effect of investments on performance, represented as a direction of the sector in demand for investment; (2) the effect-efficiency that determines the company's strategy as its position in relation to the established frontier. The results show that, as the firms get closer the technological frontier, the greater is the return of investment in R&D on performance. These results indicate that the advancement of economies towards the frontier or the best technological practices depends on policies that incorporate the influence of the 'development stage' in the outcome of this policy.

Suggested Citation

  • Leonardo Rocha Andrade & Leonardo Q. Cardenas & Fernando Dias Lopes & Fernando P. S. Oliveira & Kaio Cesar Fernandes, 2018. "The Impact of R&D Investments on Performance of Firms in Different Degrees of Proximity to the Technological Frontier," Economics Bulletin, AccessEcon, vol. 38(2), pages 1156-1170.
    • Handle: RePEc:ebl:ecbull:eb-18-00320
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    Cited by:

    1. Liu, Ming & Shan, Yanfei & Li, Yemei, 2023. "Heterogeneous Partners, R&D cooperation and corporate innovation capability: Evidence from Chinese manufacturing firms," Technology in Society, Elsevier, vol. 72(C).
    2. Camille Loir & Bertrand Groslambert, 2023. "The impact of innovation on the profitability of the biotech industry," Economics Bulletin, AccessEcon, vol. 43(3), pages 1286-1297.
    3. Leonardo A. Rocha & Denis Vieira Sarmento & Carlos Alano S. Almeida & Napiê G.A. Silva, 2020. "Spillover, public investment and innovation: the impact of public investment in R&D on business innovation," Economics Bulletin, AccessEcon, vol. 40(3), pages 2344-2360.
    4. Tang, Jianmin & Wang, Weimin, 2020. "Technological frontier, technical efficiency and the post-2000 productivity slowdown in Canada," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 12-25.

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    More about this item

    Keywords

    Research & Development; Technological Frontier; Investments; Efficiency.;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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