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How to Increase R&D in Transition Economies? Evidence from Slovenia

Author

Listed:
  • Domadenik, Polona

    () (University of Ljubljana)

  • Prašnikar, Janez

    () (University of Ljubljana)

  • Svejnar, Jan

    () (Columbia University)

Abstract

Paper addresses the recent initiatives of EU Lisbon Agenda to increase level of R&D expenses in EU Member States by studying firm-level panel data in most advanced transition economy, Slovenia. Previous empirical literature – mainly cross-sectional – has tested the demand-pull hypothesis and found in overall that R&D expenses may be driven by output. Using a panel of over 150 Slovene firms over the 1996-2000 period, and checking for fixed effects, time, industrial and size dummies and for the path-dependent nature of R&D, we also find a significant role of sales in inducing R&D expenditures. Besides that data also confirm that internal funds and (un)successful bargaining for higher wages present significant variables for higher R&D expenses. However, at the micro level, the demand-pull, internal funds and bargaining effects play a varying role for the different sub-samples of firms. In particular, exporting firms, those which are liquidity-constrained, those not receiving public subsidies and those not heading a business group, seem to be particularly sensitive in deciding their R&D expenditures. R&D behavior at the firm level is modeled as error-correction model and estimated in system GMM specification.

Suggested Citation

  • Domadenik, Polona & Prašnikar, Janez & Svejnar, Jan, 2007. "How to Increase R&D in Transition Economies? Evidence from Slovenia," IZA Discussion Papers 2801, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2801
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    References listed on IDEAS

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    Cited by:

    1. Álvarez, Inmaculada C. & Kao, Chihwa & Romero-Jordán, Desiderio, 2016. "Long run effect of public grants on the R&D investment: A non-stationary panel data approach," Efficiency Series Papers 2016/04, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    2. Hashi, Iraj & Stojčić, Nebojša, 2013. "The impact of innovation activities on firm performance using a multi-stage model: Evidence from the Community Innovation Survey 4," Research Policy, Elsevier, vol. 42(2), pages 353-366.

    More about this item

    Keywords

    institutions; openness; R&D investment; firms in transition; transition; employee ownership and control;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • P2 - Economic Systems - - Socialist Systems and Transition Economies

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