Back to Basics: Why do Firms Invest in Research?

Ashish Arora (), Sharon Belenzon and Lia Sheer

No 23187, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: If scientific knowledge is a public good, why do firms invest in research? This paper revisits this classic question with new data on patent citations to scientific publications by corporations. Using data on 4,736 firms for the period 1980-2006, we document that corporate investment in research is closely related to its use in internal invention. Specifically, firms that build on their scientific research in their inventive activity invest more in research than those that are less successful in using their research internally. Consistent with this, research that is internally used is valued more and is more productive. Our results are consistent with the view that to justify further investment in research corporate scientists need to demonstrate that their recent scientific work is useful for the core inventive activity of the sponsoring firm.

JEL-codes: O31 O32 (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-ino, nep-ipr, nep-knm, nep-sbm and nep-tid
Note: PR
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Citations: View citations in EconPapers (30)

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