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The role of ownership as R&D incentive in business groups

Author

Listed:
  • Enrico Guzzini

    () (Università degli Studi e-Campus, Italy)

  • Donato Iacobucci

    () (Dept. of Information Engineering Università Politecnica delle Marche, Italy)

Abstract

Several empirical papers have shown that firms belonging to business groups have a higher propensity to engage in R&D. The purpose of the paper is to demonstrate that this higher propensity depends on the ownership share of controlled companies, besides the presence of co-ordination mechanisms. We develop an analytical model and we empirically test the predictions of the model using a dataset of Italian manufacturing firms. From the development of this model we derive three main implications: a) that there is no difference in R&D propensity between stand-alone firms and firms at the bottom of business groups; b) that head and intermediate firms have a higher R&D propensity compared to stand-alone and firms at the bottom of the group; c) that the intensity of R&D depends on the ownership shares in controlled companies. Overall the results of the empirical analysis are in accordance with the implications of the model.

Suggested Citation

  • Enrico Guzzini & Donato Iacobucci, 2012. "The role of ownership as R&D incentive in business groups," Working Papers 1205, c.MET-05 - Centro Interuniversitario di Economia Applicata alle Politiche per L'industria, lo Sviluppo locale e l'Internazionalizzazione.
  • Handle: RePEc:cme:wpaper:1205
    as

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    File Function: First version, 2012
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    References listed on IDEAS

    as
    1. Brusco, Sandro & Panunzi, Fausto, 2005. "Reallocation of corporate resources and managerial incentives in internal capital markets," European Economic Review, Elsevier, vol. 49(3), pages 659-681, April.
    2. Sharon Belenzon & Tomer Berkovitz, 2010. "Innovation in Business Groups," Management Science, INFORMS, pages 519-535.
    3. Pierre Blanchard & Jean-Pierre Huiban & Patrick Sevestre, 2010. "R&D and Productivity in Corporate Groups: An Empirical Investigation Using a Panel of French Firms," NBER Chapters,in: Contributions in Memory of Zvi Griliches, pages 461-485 National Bureau of Economic Research, Inc.
    4. Elena Huergo & Jordi Jaumandreu, 2004. "How Does Probability of Innovation Change with Firm Age?," Small Business Economics, Springer, vol. 22(3_4), pages 193-207, April.
    5. Elena Cefis & Stephanie Rosenkranz & Utz Weitzel, 2009. "Effects of coordinated strategies on product and process R&D," Journal of Economics, Springer, vol. 96(3), pages 193-222, April.
    6. Cameron,A. Colin & Trivedi,Pravin K., 2008. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9787111235767, December.
    7. Wolfgang Becker & Juergen Peters, 2000. "Technological Opportunities, Absorptive Capacities, and Innovation," Discussion Paper Series 195, Universitaet Augsburg, Institute for Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    business groups; R&D investment; knowledge spillovers.;

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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