The Impact of Firm’s R&D Strategy on Profit and Productivity

Börje Johansson () and Hans Lööf ()

No 156, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: This paper investigates how a firm’s R&D strategy influences the firm performance as measured by productivity and profitability. A formal production model is introduced to define and interpret alternative ways of measuring the impact of R&D. Studying 1,767 randomly selected firms from the Swedish manufacturing sector, the main findings are: (i) firms which apply persistent R&D perform better than firms with occasional as well as no R&D, (ii) occasional R&D is associated with lower performance than no R&D, and (iii) in quantile regressions the positive effect from R&D persistency is lacking for low productivity firms (lowest quartile) indicating a non-linear response. Moreover, the analysis recognises the different roles of ordinary and knowledge labour in production when specifying alternative performance measures and when identifying knowledge labour as a firm’s R&D capacity, which has a highly significant impact on firm performance. Introducing a formal production model in order to define and interpret alternative ways of measuring the impact of R&D, we apply simple ordinary OLS and quantile regressions on the economic model for analyzing the importance for a particular R&D strategy on firms’ productivity and profitability. To the best of our knowledge, we believe that the main findings of the analysis make contributions to the R&D literature.

Keywords: R&D; productivity; profit; innovation; production analysis (search for similar items in EconPapers)
JEL-codes: L19 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eff, nep-ino, nep-ipr, nep-knm, nep-mic and nep-tid
Date: 2008-12-03
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:cesisp:0156

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