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What Governs Firm-Level R&D: Internal or External Factors?

Author

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  • William Griffiths

    (Intellectual Property Research Institute of Australia, The University of Melbourne and Department of Economics, The University of Melbourne)

  • Elizabeth Webster

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

Two parallel streams of research investigating the determinants of corporate R&D exist: one from economics and the other from management. The economists' variables tend to reflect the firm's external environment while the explanatory variables used by management scientists are commonly internal to the firm. This paper combines both approaches to test for the relative importance of each type of factor using firm-level data on large Australian companies from 1990 to 2005. Our evidence suggests that most of a firm's R&D activity can be explained by time-invariant factors which we believe relate to internal and specific characteristics such as the firm's managerial style, competitive strategy and how it communicates with employees. Of the remaining time-varying portion, we find that past profits, the rate of growth of the industry and the level of R&D activity over the firm's industry is pertinent. These results are suggestive since we cannot clearly identify the extent to which the firm's internal behaviour is conditioned by its external environment.

Suggested Citation

  • William Griffiths & Elizabeth Webster, 2009. "What Governs Firm-Level R&D: Internal or External Factors?," Melbourne Institute Working Paper Series wp2009n13, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2009n13
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2009n13.pdf
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    3. Reichardt, Kristin & Rogge, Karoline, 2014. "How the policy mix and its consistency impact innovation: Findings from company case studies on offshore wind in Germany," Working Papers "Sustainability and Innovation" S7/2014, Fraunhofer Institute for Systems and Innovation Research (ISI).

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