A Functional-Form-Free Test of the Research and Development/Firm Size Relationship

James Holmes, Patricia Hutton and Edward Weber

Journal of Business & Economic Statistics, 1991, vol. 9, issue 1, 85-90

Abstract: Parametric testing of the relationship between research and development (R&D) and firm size is limited by the hypothesized functional form, predominantly assumed to be linear in the logarithms of both variables. With a transformation of variables, the null hypothesis of constant returns to scale can be tested employing the multiple-rank F-test procedure. The findings of this analytical approach suggest that R&D intensity varies with firm size in some industries but not in others, and where it does vary, there is more evidence that R&D intensity is negatively rather than positively related to firm size.

Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:9:y:1991:i:1:p:85-90

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