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Firm growth and R&D expenditure
journal contribution
posted on 2023-06-08, 07:31 authored by Alex Coad, Rekha RaoWe apply a panel vector autoregression model to a firm-level longitudinal database to observe the co-evolution of sales growth, employment growth, profits growth and the growth of research and development (R&D) expenditure. Contrary to expectations, profit growth seems to have little detectable association with subsequent R&D investment. Instead, firms appear to increase their total R&D expenditure following growth in sales and employment. In a sense, firms behave ‘as if’ they aim for a roughly constant ratio of R&D to employment (or sales). We observe heterogeneous effects for growing or shrinking firms, however, suggesting that firms are less willing to reduce their R&D levels following a negative growth shock than they are willing to increase R&D after a positive shock.
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Publication status
- Published
Journal
Economics of Innovation and New TechnologyISSN
1043-8599Publisher
Taylor and FrancisExternal DOI
Issue
2Volume
19Page range
127-145Department affiliated with
- SPRU - Science Policy Research Unit Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-02-06Usage metrics
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