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Corporate R&D and Firm Efficiency: Evidence from Europe’s Top R&D Investors

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  • Kumbhakar, Subal C.

    () (Binghamton University, New York)

  • Ortega-Argilés, Raquel

    () (IN+ Center for Innovation)

  • Potters, Lesley

    (Utrecht School of Economics)

  • Vivarelli, Marco

    () (Università Cattolica del Sacro Cuore)

  • Voigt, Peter

    () (European Commission)

Abstract

The main objective of this study is to investigate the impact of corporate R&D activities on firms' performance, measured by labour productivity. To this end, the stochastic frontier technique is applied, basing the analysis on a unique unbalanced longitudinal dataset consisting of 532 top European R&D investors over the period 2000–2005. R&D stocks are considered as pivotal input in order to control for their particular contribution to firm-level efficiency. Conceptually, the study quantifies the technical inefficiency of a given company and tests empirically whether R&D activities could explain the distance from the efficient boundary of the production possibility set, i.e. the production frontier. From a policy perspective, the results of this study suggest that – if the aim is to leverage companies' productivity – emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. By contrast, supporting corporate R&D in the low-tech sector turns out to have a minor effect. Instead, encouraging investment in fixed assets appears vital for the productivity of low-tech industries. However, with regard to firms' technical efficiency, R&D matters for all industries (unlike capital intensity). Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an 'erga omnes' approach across all sectors appears inappropriate.

Suggested Citation

  • Kumbhakar, Subal C. & Ortega-Argilés, Raquel & Potters, Lesley & Vivarelli, Marco & Voigt, Peter, 2009. "Corporate R&D and Firm Efficiency: Evidence from Europe’s Top R&D Investors," IZA Discussion Papers 4657, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4657
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    Cited by:

    1. Letizia Montinari & Michael Rochlitz, 2012. "Absorptive Capacity and Efficiency: A Comparative Stochastic Frontier Approach Using Sectoral Data," Working Papers 4/2012, IMT Institute for Advanced Studies Lucca, revised Jun 2012.
    2. Derya Fındık & Aysıt Tansel, 2013. "Intangible investment and Technical efficiency: The case of software-intensive manufacturing firms in Turkey," EY International Congress on Economics I (EYC2013), October 24-25, 2013, Ankara, Turkey 235, Ekonomik Yaklasim Association.
    3. Kancs, d’Artis & Siliverstovs, Boriss, 2016. "R&D and non-linear productivity growth," Research Policy, Elsevier, vol. 45(3), pages 634-646.
    4. Sara Amoroso & Pietro Moncada-Paternò-Castello & Antonio Vezzani, 2017. "R&D profitability: the role of risk and Knightian uncertainty," Small Business Economics, Springer, vol. 48(2), pages 331-343, February.
    5. Piva, Mariacristina & Tani, Massimiliano & Vivarelli, Marco, 2017. "The Productivity Impact of Business Mobility: International Evidence," GLO Discussion Paper Series 14, Global Labor Organization (GLO).
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    7. Paul Wakke & Knut Blind & Florian Ramel, 2016. "The impact of participation within formal standardization on firm performance," Journal of Productivity Analysis, Springer, vol. 45(3), pages 317-330, June.
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    9. 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.
    10. Rosario Sanchez & Angeles Díaz, 2014. "Innovation, exports and technical efficiency in Spain," EcoMod2014 6783, EcoMod.
    11. Subal Kumbhakar & Raquel Ortega-Argilés & Lesley Potters & Marco Vivarelli & Peter Voigt, 2012. "Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors," Journal of Productivity Analysis, Springer, vol. 37(2), pages 125-140, April.
    12. Paulo Nunes & Marco Gonçalves & Zélia Serrasqueiro, 2013. "The influence of age on SMEs’ growth determinants: empirical evidence," Small Business Economics, Springer, vol. 40(2), pages 249-272, February.
    13. Davide Castellani & Mariacristina Piva & Torben Schubert & Marco Vivarelli, 2018. "The source of the US /EU Productivity Gap:Less and less effective R&D," LEM Papers Series 2018/16, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    14. Maria Angeles Diaz Mayans & Rosario Sánchez, 2012. "Are large innovative firms more efficient?," EcoMod2012 4454, EcoMod.
    15. Mabel Pisa & Rosario Sánchez, 2016. "Work Incentive and Productivity in Spain," Prague Economic Papers, University of Economics, Prague, vol. 2016(1), pages 99-111.
    16. Mariacristina Piva & Massimiliano Tani & Marco Vivarelli, 2018. "Business visits, knowledge diffusion and productivity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(4), pages 1321-1338, October.
    17. Derya Findik & Aysit Tansel, 2015. "​ Intangible Investment and Technical Efficiency: The Case of Software-Intensive Manufacturing Firms in Turkey," Working Papers 2015/11, Turkish Economic Association.
    18. Piva, Mariacristina & Tani, Massimiliano & Vivarelli, Marco, 2017. "Labour mobility through business visits as a way to foster productivity," MERIT Working Papers 004, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    19. Michele Cincera & Claudio Cozza & Alexander Tübke, 2014. "Main drivers for local and global R&D sourcing of European Multinational Enterprises," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 4(2), pages 227-245, December.
    20. Sara Amoroso, 2015. "Profits, R&D and labour: Breaking the law of diminishing returns to labour," JRC Working Papers on Corporate R&D and Innovation 2015-10, Joint Research Centre (Seville site).
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    22. Pietro Moncada-Paterno-Castello & Peter Voigt, 2013. "The effect of innovative SMEs' growth to the structural renewal of the EU economy - A projection to the year 2020 –," JRC Working Papers JRC83400, Joint Research Centre (Seville site).

    More about this item

    Keywords

    corporate R&D; stochastic frontier analysis; technical efficiency; productivity;

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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