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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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    Citations

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    Cited by:

    1. Burak Dindaroglu, 2011. "R&D Productivity and Firm Size in Semiconductors and Pharmaceuticals: Evidence from Citation Yields," Working Papers 1101, Izmir University of Economics.
    2. repec:spr:joevec:v:28:y:2018:i:1:d:10.1007_s00191-016-0486-0 is not listed on IDEAS
    3. Juana Sanchez, 2014. "Innovation Output Choices And Characteristics Of Firms In The U.S," Working Papers 14-42, Center for Economic Studies, U.S. Census Bureau.
    4. repec:spr:joevec:v:27:y:2017:i:3:d:10.1007_s00191-016-0487-z is not listed on IDEAS
    5. David Audretsch & Alex Coad & Agustí Segarra, 2014. "Firm growth and innovation," Small Business Economics, Springer, vol. 43(4), pages 743-749, December.
    6. Alex Coad & Nanditha Mathew & Emanuele Pugliese, 2017. "What's good for the goose ain't good for the gander: cock-eyed counterfactuals and the performance effects of R&D," LEM Papers Series 2017/21, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    7. Coad, Alex & Segarra, Agustí & Teruel, Mercedes, 2016. "Innovation and firm growth: Does firm age play a role?," Research Policy, Elsevier, vol. 45(2), pages 387-400.
    8. Juana Sanchez, 2014. "Non-technological and Mixed Modes of Innovation in the United States. Evidence from the Business Research and Development and Innovation Survey, 2008-2011," Working Papers 14-35, Center for Economic Studies, U.S. Census Bureau.
    9. Matthias Deschryvere, 2014. "R&D, firm growth and the role of innovation persistence: an analysis of Finnish SMEs and large firms," Small Business Economics, Springer, vol. 43(4), pages 767-785, December.
    10. Francesco Lamperti & Roberto Mavilia & Simona Castellini, 2017. "The role of Science Parks: a puzzle of growth, innovation and R&D investments," The Journal of Technology Transfer, Springer, vol. 42(1), pages 158-183, February.
    11. Mariana Mazzucato & Stuart Parris, 2015. "High-growth firms in changing competitive environments: the US pharmaceutical industry (1963 to 2002)," Small Business Economics, Springer, vol. 44(1), pages 145-170, January.
    12. repec:aes:amfeco:v:45:y:2017:i:19:p:509 is not listed on IDEAS
    13. Angela Triguero & David Córcoles & Maria Cuerva, 2014. "Persistence of innovation and firm’s growth: evidence from a panel of SME and large Spanish manufacturing firms," Small Business Economics, Springer, vol. 43(4), pages 787-804, December.
    14. Markéta Šeligová, 2016. "The Effects of R&D Intensity and Tax Incentives on Firms Growth of PIGS Countries," European Financial and Accounting Journal, University of Economics, Prague, vol. 2016(2), pages 53-68.
    15. Dario Guarascio & Federico Tamagni, 2016. "Persistence of innovation and patterns of firm growth," LEM Papers Series 2016/31, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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