Whos doing who? Growth of sales, employment, assets, profits and R&D entangled in a curious five-way love triangle

Alex Coad () and Nicola Grassano

No 2016-03, JRC Working Papers on Corporate R&D and Innovation from Joint Research Centre

Abstract: Understanding causal relationships among key economic variables is crucial for policy makers, who wish to e.g. stimulate private R&D growth. To this end, we applied a technique recently imported from the Machine Learning community (Structural Vector Autoregressions (SVARs) identified using Independent Components Analysis (ICA)) to a set of the worlds largest R&D investors. Our analysis highlights the key role of sales growth, rather than profits growth, in stimulating R&D growth. R&D growth appears at the end of the causal ordering of the growth process. Our results suggest that policies to increase private R&D would do better to target sales rather than profits.

Keywords: R&D investment; firm growth; SVAR; sales growth; industrial dynamics (search for similar items in EconPapers)
JEL-codes: L25 O30 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2016-06
New Economics Papers: this item is included in nep-net and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ipt:wpaper:201603

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