Corporate R&D and Firm Efficiency: Evidence from Europe’s Top R&D Investors

Subal Kumbhakar, Raquel Ortega-Argiles, Lesley Potters, Marco Vivarelli () and Peter Voigt

No 4657, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The main objective of this study is to investigate the impact of corporate R&D activities on firms' performance, measured by labour productivity. To this end, the stochastic frontier technique is applied, basing the analysis on a unique unbalanced longitudinal dataset consisting of 532 top European R&D investors over the period 2000–2005. R&D stocks are considered as pivotal input in order to control for their particular contribution to firm-level efficiency. Conceptually, the study quantifies the technical inefficiency of a given company and tests empirically whether R&D activities could explain the distance from the efficient boundary of the production possibility set, i.e. the production frontier. From a policy perspective, the results of this study suggest that – if the aim is to leverage companies' productivity – emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. By contrast, supporting corporate R&D in the low-tech sector turns out to have a minor effect. Instead, encouraging investment in fixed assets appears vital for the productivity of low-tech industries. However, with regard to firms' technical efficiency, R&D matters for all industries (unlike capital intensity). 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.

Keywords: corporate R&D; stochastic frontier analysis; technical efficiency; productivity (search for similar items in EconPapers)
JEL-codes: L2 O3 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2009-12
New Economics Papers: this item is included in nep-eec, nep-eff, nep-ino, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published - published in: Journal of Productivity Analysis, 2012, 37, 125-140

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Related works:
Journal Article: Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors (2012)
Working Paper: Corporate R&D and firm efficiency: Evidence from Europe´s top R&D investors (2010)
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