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Relation of Firm Size to R&D Productivity

  • Jinyoung Kim

    (Department of Economics, Korea University, Korea)

  • Sangjoon John Lee

    (College of Business, Alfred University, U.S.A.)

  • Gerald Marschke

    (Department of Economics, University at Albany¡XSUNY, U.S.A. NBER and IZA)

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 find no relationship between the number of patents produced per inventor and firm size.

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Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

Volume (Year): 8 (2009)
Issue (Month): 1 (April)
Pages: 7-19

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Handle: RePEc:ijb:journl:v:8:y:2009:i:1:p:7-19
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  1. Gerald Marschke & Jinyoung Kim & Sangjoon John Lee, 2004. "Research Scientist Productivity and Firm Size: Evidence from Panel Data on Investors," Discussion Papers 04-06, University at Albany, SUNY, Department of Economics.
  2. 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., vol. 1(1), pages 29-53, January.
  3. Zoltan Acs & David Audretsch, 1990. "Innovation and Small Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011131, June.
  4. 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, vol. 34(6), pages 966-976, August.
  5. 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.
  6. Cohen, Wesley M & Klepper, Steven, 1996. "A Reprise of Size and R&D," Economic Journal, Royal Economic Society, vol. 106(437), pages 925-51, July.
  7. Xulia González & Jordi Jaumandreu, . "Threshold effects in product R&D decisions: theoretical framework and empirical analysis," Studies on the Spanish Economy 45, FEDEA.
  8. 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.
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