Schumpeters legacy: A new perspective on the relationship between firm size and R&D

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This paper shows that firm heterogeneity in technological competence, rather than differences in industry-specific characteristics, is the primary condition determining the long-debated relationship between firm size and R&D. Specifically, by utilizing a formal model of firm R&D that shows that profit-maximizing firm R&D intensity is determined jointly by firm-specific technological competence and consumer preference regarding quality and price, this paper suggests that firm size affects firm R&D intensity not directly, but through its influence on firm-specific technological competence. In particular, four predictions are drawn and tested empirically: (1) in general, the size-R&D relationship is less-than-proportional or inverted U-shaped, especially for low-technological-competence firms; (2) however, the common less-than-proportional relationship disappears, and a more-than-proportional relationship becomes increasingly likely, for firms with high levels of technological competence, plausibly due to competence-enhancing, learning economies of scale and/or scope in R&D; (3) firms with larger accumulated R&D experience are, ceteris paribus, less likely to exhibit the common less-than-proportional relationship; (4) among industries, a greater within-industry departure from the proportional size-R&D relationship is expected for industries with seemingly high, rapidly changing technological-opportunity conditions. These predictions, especially pertaining to the conditioning role of technological competence in the size-R&D relationship, are empirically supported by the unique data by the World Bank. (c) 2005 Elsevier B.V. All rights reserved.
Publisher
ELSEVIER SCIENCE BV
Issue Date
2005-08
Language
English
Article Type
Article
Keywords

INDUSTRIAL-RESEARCH; EMPIRICAL-ANALYSIS; MARKET-STRUCTURE; INNOVATION; DETERMINANTS; OPPORTUNITY; COMPETITION; SPILLOVERS; PATENTS; GROWTH

Citation

RESEARCH POLICY, v.34, no.6, pp.914 - 931

ISSN
0048-7333
DOI
10.1016/j.respol.2005.04.006
URI
http://hdl.handle.net/10203/4287
Appears in Collection
MT-Journal Papers(저널논문)
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