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Innovation and Firm Growth: Is R&D Worth It?

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  • Pelin Demirel
  • Mariana Mazzucato

Abstract

The paper contributes to an emerging literature that critically questions the degree to which R&D, at the centre of national and transnational innovation policies, results in firm growth. The differences in how innovation affects firm growth is explored for small and large publicly quoted US pharmaceutical firms between 1950 and 2008. We observe that the positive impact of R&D on firm growth is highly conditional upon a combination of firm-specific characteristics such as firm size, patenting and persistence in patenting. For small firms, R&D boosts growth for only a subset of firms: namely, those that patent persistently for a minimum of five years. For large pharmaceutical firms, on the other hand, R&D may have a negative impact on growth; potentially resulting from the low R&D productivity these firms have suffered from since the mid-1990s. These results raise important issues around the R&D and firm growth relationship for small and large firms as well the role of persistence in innovation for boosting firm performance.

Suggested Citation

  • Pelin Demirel & Mariana Mazzucato, 2012. "Innovation and Firm Growth: Is R&D Worth It?," Industry and Innovation, Taylor & Francis Journals, vol. 19(1), pages 45-62, January.
    • Handle: RePEc:taf:indinn:v:19:y:2012:i:1:p:45-62
    DOI: 10.1080/13662716.2012.649057
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    References listed on IDEAS

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    1. Alex Coad, 2009. "The Growth of Firms," Books, Edward Elgar Publishing, number 13424.
    2. Gambardella,Alfonso, 1995. "Science and Innovation," Cambridge Books, Cambridge University Press, number 9780521451185.
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