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Contract enforcement and R&D investment

Author

Listed:
  • Seitz, Michael
  • Watzinger, Martin

Abstract

Motivated by the differences in innovation across countries, this paper evaluates the role of contract enforcement for R&D investments. We find empirical evidence that weak contract enforcement is associated with lower R&D investment: R&D intensity in an industry increases with the quality of the judicial system. This effect is particularly strong in industries that cannot buy inputs on competitive markets and thus depend more on contracts to acquire inputs. In line with this, we show that contract enforcement is particularly important in industries in which vertical integration is not a viable option.

Suggested Citation

  • Seitz, Michael & Watzinger, Martin, 2017. "Contract enforcement and R&D investment," Munich Reprints in Economics 55052, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:55052
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    Cited by:

    1. Fulvio Castellacci & Prince C. Oguguo & Isabel Maria Bodas Freitas, 2022. "Quality of pro-market national institutions and firms’ decision to invest in R&D: evidence from developing and transition economies," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(1), pages 35-57, March.
    2. Li, Junqing & Yang, Zhiyuan & Liu, Kaifeng, 2024. "Research on contracting institutions and convergence," China Economic Review, Elsevier, vol. 84(C).
    3. Joao Estevao, 2022. "An Analysis of the Impact of the 2030 Agreement on R&D Intensity in the Energy Sector," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 204-216, July.
    4. Sahar Milani & Rebecca Neumann, 2018. "International financial openness and industrial R&D," Economics Bulletin, AccessEcon, vol. 38(1), pages 490-500.
    5. Rodrigues, Ricardo & Samagaio, António & Felício, Teresa, 2020. "Corporate governance and R&D investment by European listed companies," Journal of Business Research, Elsevier, vol. 115(C), pages 289-295.
    6. Fei Xie & Bohui Zhang & Wenrui Zhang, 2022. "Trust, Incomplete Contracting, and Corporate Innovation," Management Science, INFORMS, vol. 68(5), pages 3419-3443, May.
    7. An, Jiafu & Chen, Boyang & Zhao, Ruoran, 2025. "Epidemic disease and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 231(C).
    8. Ortiz, Rodrigo & Fernandez, Viviana, 2022. "Business perception of obstacles to innovate: Evidence from Chile with pseudo-panel data analysis," Research in International Business and Finance, Elsevier, vol. 59(C).
    9. Alam, Ashraful & Uddin, Moshfique & Yazdifar, Hassan, 2019. "Institutional determinants of R&D investment: Evidence from emerging markets," Technological Forecasting and Social Change, Elsevier, vol. 138(C), pages 34-44.
    10. Gideon Ndubuisi & Solomon Owusu, 2022. "Trust, Efficient Contracting and Export Upgrading," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 2708-2729, December.
    11. Chuanyi Wang & Jiale Yang & Zhe Cheng & Chaoqun Ni, 2019. "Postgraduate Education of Board Members and R&D Investment—Evidence from China," Sustainability, MDPI, vol. 11(22), pages 1-17, November.
    12. Maskus, Keith E. & Milani, Sahar & Neumann, Rebecca, 2019. "The impact of patent protection and financial development on industrial R&D," Research Policy, Elsevier, vol. 48(1), pages 355-370.
    13. Zhang, Min & Rodríguez-Pose, Andrés, 2024. "Government reform and innovation performance in China," LSE Research Online Documents on Economics 122728, London School of Economics and Political Science, LSE Library.
    14. Ming Yi & Yiqian Wang & Modan Yan & Lina Fu & Yao Zhang, 2020. "Government R&D Subsidies, Environmental Regulations, and Their Effect on Green Innovation Efficiency of Manufacturing Industry: Evidence from the Yangtze River Economic Belt of China," IJERPH, MDPI, vol. 17(4), pages 1-17, February.
    15. Batool Misbah & Khan Faiza Azhar & Tufail Saira, 2025. "Radical Innovations and Economic Development: Comparative Role of Social and Human Capital in Developing Countries," Zagreb International Review of Economics and Business, Sciendo, vol. 28(2), pages 231-254.
    16. Yadav, Akash Singh & Yadav, Inder Sekhar, 2025. "The impact of country- and firm-level governance on capital allocation efficiency: New evidence from India," Journal of Financial Stability, Elsevier, vol. 78(C).

    More about this item

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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