Corporate R&D and firm efficiency: Evidence from Europe's top R&D investors

The main objective of this study is to investigate the impact of corporate research and development (R&D) activities on firm performance, measured by labour productivity. To this end, the stochastic frontier technique is used on a unique unbalanced longitudinal dataset comprising top European R&D investors over the period 2000–2005. In this framework, this study quantifies technical inefficiency of individual firms. From a policy perspective, the results of this study suggest that if the aim is to leverage firms’ productivity, the emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. On the other hand, corporate R&D in the low-tech sector is found to have a minor effect in explaining productivity. Instead, encouraging investment in fixed assets appears important for the productivity of low-tech industries. 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. However, with regard to technical efficiency, R&D intensity is found to be a pivotal factor in explaining firm efficiency and this turns out to be true for all industries.

KUMBHAKAR Subal;  ORTEGA ARGILÉS Raquel;  POTTERS Lesley;  VIVARELLI Marco;  VOIGT Peter; 

2012-01-17

SPRINGER

JRC65161

0895-562X,   

http://www.springerlink.com/content/QT502P86553L47Q3,    https://publications.jrc.ec.europa.eu/repository/handle/JRC65161,   

10.1007/s11123-011-0223-5,