R versus D: Estimating the differentiated effect of research and development on innovation results

Barge-Gil, Andrés and López, Alberto (2011): R versus D: Estimating the differentiated effect of research and development on innovation results.

Abstract

R&D is considered to be the main source of innovation. We argue that R&D is too broad a measure, including activities differing in purposes, culture, people, management and other features. However, empirical studies have not analyzed them separately, mainly due to the lack of data. Using firm-level data, the aim of this paper is to estimate the differentiated effect of research and development on different innovation outputs. Results show that both research and development activities are important. However, we find that development activities are more important for product innovation, while the effect of research activities is higher on process innovation. Moreover, we analyze differences by technological intensity of the sector. When analyzing product and process innovations, we find evidence supporting the existence of higher payoffs to development and, especially to research in low-tech sectors when compared with high-tech ones.

• Item Type: MPRA Paper
• Language: English
• Keywords: R&D, patents, product innovation, process innovation, impact
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General

References

Abramovsky, L., Kremp, E., López, A., Schmidt, T. and Simpson, H. (2009). Understanding co-operative innovative activity: Evidence from four European countries, Economics of Innovation and New Technology, 18(3), 243-265.

Acs, Z.; Audretsch, D. and Feldman, M. (1992). Real effects of academic research: comment, American Economic Review, 82(1), 363-367.

Aerts, K. and Thorwarth, S. (2009). Additionality effects of public R&D funding: “R” vs. “D”, FBE Research Report MSI_0811, K.U.Leuven.

Amsdem, A. H. and Tschang, F.T. (2003). A new approach to assessing the technological complexity of different categories of R&D (with examples from Singapore), Research Policy, 32, 553-572.

Angrist, JD. and Pischke, JD. (2008). Mostly Harmless Econometrics. An Empiricist's Companion. Princeton University Press.

Arnold, E. (2004). Evaluating research and innovation policy: a systems world needs systems evaluations, Research Evaluation, 131, 3-17.

Asheim, B.T. and Coenen, L. (2005). Knowledge bases and regional innovation systems: Comparing Nordic clusters, Research Policy, 34, 1173-1190.

Balconi, M., Brusoni, S. and Orsenigo, L. (2010). In defence of the linear model: An essay, Research Policy, 39, 1-13.

Barge-Gil, A., Nieto, MJ. and Santamaría, L. (2011). Hidden innovators: the role of non R&D activities, Technology Analysis & Strategic Management, Forthcoming.

Bercovitz, J.E.L. and Feldman, M. P. (2007). Fishing upstream: Firm innovation strategy and university alliances, Research Policy, 36, 930-948.

Bertrand, O. (2009). Effects of foreign acquisitions on R&D activity: Evidence from firm-level data in France, Research Policy, 38, 1021-1031.

Cameron, A. C. and Trivedi, P. K. (1998). Regression Analysis of Count Data. NewYork: Cambridge University Press.

Clausen, T.H. (2009). Do subsidies have positive impacts on R&D and innovation activities at the firm level, Structural Change and Economic Dynamics, 20, 239-253.

Cohen, W. and Levinthal, D. (1989). Innovation and learning: The two faces of R&D, Economic Journal, 99, 569-596.

Cohen, W. and Levinthal, D., (1990). Absorptive capacity: A new perspective on learning and innovation, Administrative Science Quarterly, 35(1), 128-152.

Conte, A. (2009). Mapping innovative activity using microdata, Applied Economic Letters, 16, 1795-1799.

Chiesa, V. (2001). R&D strategy and organisation. Managing technical change in dynamic contexts. London. Imperial College Press.

Chiesa, V. and Frattini, F. (2007). Exploring the differences in performance measurement between research and development: evidence from a multiple case study, R&D Management, 37(4), 283-301.

Crepon, B., Duguet, E. and Mairesse, J. (1998). Research, innovation and productivity: An econometric analysis at the firm level, Economics of Innovation and New Technology, 7, 115-158.

Crepon, B. and Mairesse, J. (1993). Recherche et développement, qualification et productivité des enterprises, in D. Guellec (ed.), Innovations et compétivité, INSEE-Méthodes no. 37-38, Paris.

Cuneo, P. and Mairesse, J. (1984). Productivity and R&D at the firm level in French manufacturing, in Z. Griliches (eds), R&D, patents and productivity. Chicago. IL: University of Chicago Press, 375-392.

Czarnitzki, D., Kraft, K. and Thorwarth, S. (2009). The knowledge production of “R” and “D”, Economic Letters, 105, 141-143.

Czarnitzki, D., Hottenrott, H. and Thorwarth, S. (2010). Industrial research versus development investment: the implications of financial constraints, Cambridge Journal of Economics, forthcoming.

Czarnitzki, D. and Thorwarth, S. (2010). Productivity effects of basic research in low-tech and high-tech industries. Mimeo.

de Jong, J. and Marsili,O. (2006). The fruit flies of innovations: A taxonomy of innovative small firms, Research Policy, 35, 213-229.

Dosi, G., Marengo, L. and Pasquali, C. (2006). How much should society fuel the greed of innovators? On the relation between appropriability, opportunities and rates of innovation, Research Policy, 35, 1110-1121.

Fariñas, J.C., Huergo, E., Jaumandreu, J. and López, A. (2009). Informe Pitec 2008. La innovación en la empresa española, Fundación Española para la Ciencia y la Tecnología, Madrid.

Freeman, C. (1994). The economics of technical change, Cambridge Journal of Economics, 18, 463–514.

Griffith, R., Huergo, E., Mairesse, J. and Peters, B. (2006). Innovation and productivity across four European countries, Oxford Review of Economic Policy, 22(4), 483-498.

Griliches, Z., (1995). R&D and productivity: Econometric results and measurement issues, in Handbook of the economics of innovation and technological change, ed. P. Stoneman. Oxford, U.K., and Cambridge, Mass.: Basil Blackwell, 52-89.

Hall, B.H., (1996). The private and social returns to research and development, in Technology, R&D, and the economy, ed. B. Smith and C. Barfield. Washington, D.C.: Brookings Institution and American Enterprise Institute. 140-62.

Hall, B.H., Lotti, F. and Mairesse, J. (2009). Innovation and productivity in SMEs: empirical evidence from Italy, Small Business Economics, 33, 13-33.

Hall, B.H., Mairesse, J. and Mohnen, P. (2010). Measuring the returns to R&D, in Hall, B.H., Rosenberg, N. (Eds.): Handbook of the Economics of Innovation.

Hirsch-Kreinsen, H. (2009). “Low-Tech” Innovations, Industry and Innovation, 15(1), 19-43.

Howells, J. (2008). New directions in R&D: current and prospective challenges, R&D Management, 38(3), 241-52.

Jaffe, A. (1989). Real effects of academic research, American Economic Review, 79(5), 957-970.

Karlsson, M., Trygg, L. and Elfström, B-O. (2004). Measuring R&D productivity: complementing the picture by focusing on research activities, Technovation, 24, 179-186.

Kirner, E., Kinkel, S. and Jaeger, A. (2009). Innovation paths and the innovation performance of low-technology firms-An empirical analysis of German industry, Research Policy, 38, 447-458.

Klevorick, A., Levin, R., Nelson, R. and Winter, S. (1995). On the sources and significance of inter-industry differences in technological opportunities, Research Policy, 24, 185–205.

Koenker, R. (2005). Quantile Regression. Cambridge University Press.

Laestadius, S., 1998. Technology level, knowledge formation and industrial competence in paper manufacturing, in: Eliasson, G., et al. (Eds.), Micro Foundations of Economic Growth. The University of Michigan Press, Ann Arbour, pp. 212–226.

Leifer, R. and Triscari, T. (1987). Research versus Development: Differences and similarities, IEEE Transactions on Engineering Management, 34(2), 71-78.

Link, A. N. (1982). An analysis of the composition of R&D spending, Southern Economic Journal, 49(2), 342-349.

Link, A.N. (1985). The changing composition of R&D, Managerial and Decision Economics, 6(2), 125-128.

Mairesse, J. and Mohnen, P. (1995). Research & development and productivity: A survey of the econometric literature, CIRANO, December. Mimeo.

Mairesse, J. and Mohnen, P. (2005). The importance of R&D for innovation: A reassessment using French survey data, Journal of Technology Transfer, 30 (1/2), 183-197.

Mairesse, J. and Mohnen, P. (2010). Using innovation surveys for econometric analysis, in Hall, B.H., Rosenberg, N. (Eds.), Handbook of the Economics of Innovation.

Mairesse, J. and Sassenou, M. (1991). R&D and productivity: A survey of econometric studies at the firm level, STI Review, 8, 9-43.

Malerba, F. and Orsenigo, L. (1993). Technological regimes and firm behaviour, Industrial and Corporate Change, 2(1), 45-70.

Malerba, F. (2002). Industry systems of innovation and production, Research Policy, 31, 247-264.

Malerba, F. (2007). Innovation and the dynamics and evolution of industries: Progress and challenges, International Journal of Industrial Organization, 25, 675-699.

Mansfield, E. (1981). Composition of R and D expenditures: Relationship to size of firm, concentration and innovative output, Review of Economics and Statistics, 63(4), 610-615.

Martinez-Ros, E. (2000). Explaining the decisions to carry out product and process innovations: the Spanish case, The Journal of High Technology Management Research, 10(2), 223-242.

Moncada-Paterno-Castello, P., Ciupagea, C., Smith, K., Tubke, A. and Tubbs, M. (2010). Does Europe perform too little corporate R&D? A comparison of EU and non-EU corporate R&D performance, Research Policy, 39(4), 523-536.

Moodyson, J., Coenen, L. and Asheim, B. (2008). Explaining spatial patterns of innovation: analytical and synthetic modes of knowledge creation in the Medicon Valley life-science cluster, Environment and Planning, 40, 1040-1056.

Nadiri, M. I., (1993). Innovations and technological spillovers, NBER Working Paper no. 4423. Cambridge, Mass.: National Bureau of Economic Research.

Nelson, R.R. (1959). The simple economics of basic research, Journal of Political Economy, 32, 297-306.

OECD (2005), Oslo Manual. Guidelines for collecting and interpreting innovation-3rd Edition. OECD Publications: Paris.

Pavitt, K. (1984). Sectoral patterns of technical change: towards a taxonomy and a theory, Research Policy, 13, 343–373

Rammer, C., Czarnitzki, D. and Spielkamp A. (2009). Innovation success of non-R&D-performers: substituting technology by management in SMEs, Small Business Economics, 33, 35–58.

Reichstein, T. and Salter, A. (2006). Investigating the sources of process innovation among UK manufacturing firms, Industrial and Corporate Change, 15(4), 653-682.

Robertson, P. and Patel, P. (2007). New wine in old bottles: technological diffusion in developed economies, Research Policy, 36, 708-721.

Romer, P.M. (1990). Endogenous technical change, Journal of Political Economy, 98(5), 71-102.

Rouvinen, P. (2002). Characteristics of product and process innovators: some evidence from the Finnish innovation survey, Applied Economic Letters, 9, 575-580.

Salter, A. and Martin, B. (2001). The economic benefits of publicly funded basic research: a critical review, Research Policy, 30, 509-524.

Santamaría, L., Nieto, MJ. and Barge-Gil, A. (2009). Beyond formal R&D: Taking advantage of other sources of innovation in low-and medium-technology industries, Research Policy, 38, 507-517.

Sirilli, G. and Evangelista, G. (1998). Technological innovation in services and manufacturing: Results from Italian surveys, Research Policy, 27(9), 881 -899.

Solow, R. M. (1957). Technical change and the aggregate production function, Review of Economics and Statistics, 31, 312-320.

Van Ark, Dougherty, S., Inklaar, R. and McGuckin, R. (2008). The structure and location of business R&D: recent trends and measurement implications, International Journal of Foresight and Innovation Policy, 4(1/2), 8-28.

Van Beers, C., Kleinknecht, A., Ortt, R. and Verburg, R. (2008). Determinants of innovative behavior. A firm’s internal practices and its external environment. Palgrave. New York.

Von Tunzelmann, N. and Acha, V. (2005). Innovation in “low-tech” industries, in Fagerberg, J., Mowery, D., Nelson, R. (eds), The Oxford Handbook of Innovation; Oxford: OUP.

Wieser, R. (2005). Research and development, productivity and spillovers: Empirical evidence at the firm level, Journal of Economic Surveys, 19(4), 587-621.

Wooldridge, J. (2002). Econometric Analysis of Cross Section and Panel Data. MIT Press.