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The Relationship Between Firm Size and Innovation Activity: A Double Decision Approach

  • Ester Martinez-Ros
  • Jose Labeaga

The main purpose of this paper is to analyse the relationship between firm size and innovation activity using Spanish data at firm level corresponding to the manufacturing sector for the period 1990-93. This exercise is different to previous applications because we allow for different size effects in the decision to innovate and the innovation count equation, in the context of a double-hurdle approach. Several tests confirm the hurdle negbin model. We find that firm size is a relevant factor, although size effects are different in both decisions. A robust result from the different specifications estimated is the rejection of the Gilbert and Newbery hypotheses. We find out that the behaviour of firm size is neither linear in the decision nor in thc count equation. We also provide additional, and sometimes different, evidence to previous Spanish studies on R&D.

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Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 11 (2002)
Issue (Month): 1 ()
Pages: 35-50

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Handle: RePEc:taf:ecinnt:v:11:y:2002:i:1:p:35-50
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  1. 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.
  2. Zvi Griliches, 1990. "Patent Statistics as Economic Indicators: A Survey," NBER Working Papers 3301, National Bureau of Economic Research, Inc.
  3. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-38, July.
  4. Jones, Andrew M, 1989. "A Double-Hurdle Model of Cigarette Consumption," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(1), pages 23-39, Jan.-Mar..
  5. Blundell, Richard & Bond, Stephen & Devereux, Michael & Schiantarelli, Fabio, 1992. "Investment and Tobin's Q: Evidence from company panel data," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 233-257.
  6. Mullahy, John, 1986. "Specification and testing of some modified count data models," Journal of Econometrics, Elsevier, vol. 33(3), pages 341-365, December.
  7. Cameron, A. Colin & Trivedi, Pravin K., 1990. "Regression-based tests for overdispersion in the Poisson model," Journal of Econometrics, Elsevier, vol. 46(3), pages 347-364, December.
  8. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June.
  9. Blundell, Richard & Griffith, Rachel & Van Reenen, John, 1995. "Dynamic Count Data Models of Technological Innovation," Economic Journal, Royal Economic Society, vol. 105(429), pages 333-44, March.
  10. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
  11. repec:fth:harver:1473 is not listed on IDEAS
  12. Winfried Pohlmeier & Volker Ulrich, 1995. "An Econometric Model of the Two-Part Decisionmaking Process in the Demand for Health Care," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 339-361.
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