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Appropriability, opportunity, firm size and innovation activities: empirical results using East and West German firm level data

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  • Felder, Johannes
  • Licht, Georg
  • Nerlinger, Eric A.
  • Stahl, Harald

Abstract

R&D expenditures of firms varies vastly between and within industries. In recent years a lot of theoretical and empirical studies attempted to explain the distribution of R&D expenditures. Four main factors repeatedly appeared in this literature: Firm size, market power, appropriability and technological opportunity. The present paper tests the empirical content of the hypotheses raised in this literature. It employs the data of the first wave of the Mannheim Innovation Panel conducted in 1993. Our study divers from the literature in several aspects: (1) The data covers firms from all size classes. The questionaire was designed to minimize the undercounting problem of R&D in small firms. (2) Besides a traditional definition of R&D we also used the concept of total innovation expenditures to capture the importance of non R& D innovation activities which are especially important for small firms. (3) We give reliable estimates on the occurrence of R&D and innovation activities in small and medium sized enterprises in Germany. (4) Our data base includes R&D performers as well as non-R&D performers. (5) We distinguish between the decision to perform R&D or not and the decision on the amount invested in R&D. We show that there are several differences with respect to both stages. As our survey collects information on several R&D enhancing characteristics of firm and market we are able to employ a more extended set of variables explaining R&D performance than most previous studies. The main results can be summarized as follows: (1) Once small firms have decided to invest in innovation activities, the amount they invest as a percentage of sales is larger than the innovation intensity of big firms. On the other hand, the probability that a firm is engaged in R&D increases strongly with firm size. The large and small firms differential in intensity can even be more pronounced if we use total innovation expenditures instead of the narrowly defined R&D expenditures only. (2) Evidence of a positive relationship between seller concentration and innovation input is rather weak. (3) Stronger appropriability conditions and higher technological opportunities enhance firms spending on investment in innovation activities and/or in R&D. (4) Certain other firm characteristics (exporting firm, financial constraints) play a role in determining innovation expenditures and R&D expenditures.

Suggested Citation

  • Felder, Johannes & Licht, Georg & Nerlinger, Eric A. & Stahl, Harald, 1995. "Appropriability, opportunity, firm size and innovation activities: empirical results using East and West German firm level data," ZEW Discussion Papers 95-21, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:9521
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    References listed on IDEAS

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    1. Klevorick, Alvin K. & Levin, Richard C. & Nelson, Richard R. & Winter, Sidney G., 1995. "On the sources and significance of interindustry differences in technological opportunities," Research Policy, Elsevier, vol. 24(2), pages 185-205, March.
    2. Acs, Zoltan J & Audretsch, David B, 1987. "Innovation, Market Structure, and Firm Size," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 567-574, November.
    3. Licht, Georg & Harhoff, Dietmar, 1993. "Das Mannheimer Innovationspanel," ZEW Discussion Papers 93-21, ZEW - Leibniz Centre for European Economic Research.
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    Cited by:

    1. Licht, Georg & Stahl, Harald, 1997. "Ergebnisse der Innovationserhebung 1996," ZEW Dokumentationen 97-07, ZEW - Leibniz Centre for European Economic Research.
    2. Spielkamp, Alfred & Vopel, Katrin, 1998. "Mapping innovative clusters in national innovation systems," ZEW Discussion Papers 98-45, ZEW - Leibniz Centre for European Economic Research.
    3. Albach, Horst & Audretsch, David B. & Fleischer, Manfred & Greb, Robert & Höfs, Evelyn & Röller, Lars-Hendrik & Schulz, Ines, 1996. "Innovation in the European chemical industry," Discussion Papers, various Research Units FS IV 96-26, WZB Berlin Social Science Center.
    4. Licht, Georg & Schnell, Wolfgang & Stahl, Harald, 1996. "Ergebnisse der Innovationserhebung 1995," ZEW Dokumentationen 96-05, ZEW - Leibniz Centre for European Economic Research.
    5. Marcel Dagenais & Pierre Mohnen, 2000. "Towards an Innovation Intensity Index: The Case of CIS 1 in Denmark and Ireland," CIRANO Working Papers 2000s-20, CIRANO.

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