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Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors

  • Subal Kumbhakar

    ()

  • Raquel Ortega-Argilés
  • Lesley Potters
  • Marco Vivarelli
  • Peter Voigt

The main objective of this study is to investigate the impact of corporate R&D activities on firms' performance, measured by labour productivity. To this end, the stochastic frontier technique is applied, basing the analysis on a unique unbalanced longitudinal dataset consisting of 532 top European R&D investors over the period 2000–2005. R&D stocks are considered as pivotal input in order to control for their particular contribution to firm-level efficiency. Conceptually, the study quantifies the technical inefficiency of a given company and tests empirically whether R&D activities could explain the distance from the efficient boundary of the production possibility set, i.e. the production frontier. From a policy perspective, the results of this study suggest that – if the aim is to leverage companies' productivity – emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. By contrast, supporting corporate R&D in the low-tech sector turns out to have a minor effect. Instead, encouraging investment in fixed assets appears vital for the productivity of low-tech industries. However, with regard to firms' technical efficiency, R&D matters for all industries (unlike capital intensity). Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an 'erga omnes' approach across all sectors appears inappropriate.

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File URL: http://hdl.handle.net/10.1007/s11123-011-0223-5
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Article provided by Springer in its journal Journal of Productivity Analysis.

Volume (Year): 37 (2012)
Issue (Month): 2 (April)
Pages: 125-140

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Handle: RePEc:kap:jproda:v:37:y:2012:i:2:p:125-140
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