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Division of labor in R&D? Firm size and specialization in corporate research

Annette Becker (), Hanna Hottenrott and Anwesha Mukherjee

Journal of Economic Behavior & Organization, 2022, vol. 194, issue C, 1-23

Abstract: Corporate research and development constitutes one of the main sources of innovation. Recent research, however, discusses a decline in corporate research and its implications for technological progress. The contribution of this study is to model research & development (R&D) decisions in an R&D investment model that allows the analysis of firms’ engagement in research (R) as compared to development (D) activities. The model predicts higher investments in both activities for larger firms, but it also shows that research intensity, i.e. the R-share in R&D, declines with firm size. We test these propositions using data of R&D-active firms over the period from 2000 to 2015. While larger firms invest indeed more in both research and development, results from panel model estimations that account for unobserved heterogeneity across firms show that the relative focus on research decreases with firm size. In addition, the empirical results suggest that, since the returns to research in terms of productivity gains decline with firm size, specialization maximizes overall returns to R and D.

Keywords: Corporate research; R&D; Firm size; Specialization; Comparative advantage; Productivity (search for similar items in EconPapers)
JEL-codes: L11 O31 O32 (search for similar items in EconPapers)
Date: 2022
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:eee:jeborg:v:194:y:2022:i:c:p:1-23

DOI: 10.1016/j.jebo.2021.12.006

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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