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Into thin air: using a quantile regression approach to explore the relationship between R&D and innovation

Author

Listed:
  • Bernd Ebersberger
  • Orietta Marsili
  • Toke Reichstein
  • Ammon Salter

Abstract

Applying quantile regression to 760 Finnish firms, we show that the relationship between R&D and firm performance is less straight forward than so far assumed. OLS regression analysis fails to capture the effect of R&D expenditure at different locations on the performance distribution. We reveal that R&D matters, especially on the medium quantiles, while regressing against the upper quantiles of the economic gains from innovation distribution exhibit decreasing returns scale in R&D. Our results confirm that Gaussian statistics fail to capture the most interesting part of the distribution - namely the extreme observations located in the tails.

Suggested Citation

  • Bernd Ebersberger & Orietta Marsili & Toke Reichstein & Ammon Salter, 2010. "Into thin air: using a quantile regression approach to explore the relationship between R&D and innovation," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(1), pages 95-102.
  • Handle: RePEc:taf:irapec:v:24:y:2010:i:1:p:95-102
    DOI: 10.1080/02692170903424448
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    Citations

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    Cited by:

    1. Bartelsman, Eric & Dobbelaere, Sabien & Peters, Bettina, 2013. "Allocation of Human Capital and Innovation at the Frontier: Firm-Level Evidence on Germany and the Netherlands," IZA Discussion Papers 7540, Institute for the Study of Labor (IZA).
    2. Westerberg, Hans Seerar, 2014. "The Return to R&D and Seller-buyer Interactions: A Quantile Regression Approach," Ratio Working Papers 231, The Ratio Institute.
    3. Andræs Barge-Gil, 2013. "Open Strategies and Innovation Performance," Industry and Innovation, Taylor & Francis Journals, vol. 20(7), pages 585-610, October.
    4. Herstad , Sverre J. & Sandven , Tore, 2015. "Innovation and corporate employment growth revisited," Papers in Innovation Studies 2015/3, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    5. Montresor, Sandro & Vezzani, Antonio, 2015. "The production function of top R&D investors: Accounting for size and sector heterogeneity with quantile estimations," Research Policy, Elsevier, vol. 44(2), pages 381-393.
    6. Gombau, Verònica & Segarra Blasco, Agustí, 2011. "Innovation and absorptive capacity: What is the role of technological frontier?," Working Papers 2072/179622, Universitat Rovira i Virgili, Department of Economics.
    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. Jeroen de Jong & Orietta Marsili, 2015. "The distribution of Schumpeterian and Kirznerian opportunities," Small Business Economics, Springer, vol. 44(1), pages 19-35, January.
    9. J Doran & G Ryan, 2016. "The effectiveness of R&D and external interaction for innovation: Insights from quantile regression," Economic Issues Journal Articles, Economic Issues, vol. 21(1), pages 47-65, March.

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