Ownership as R&D incentive in business groups

Enrico Guzzini () and Donato Iacobucci ()

Small Business Economics, 2014, vol. 43, issue 1, 119-135

Abstract: Small and medium-sized enterprises (SMEs) are supposed to be less likely to conduct formal R&D because of the lack of financial resources, weaker competencies, and the absence of scale and scope economies. These limitations may be overcome when an SME belongs to a business group. Empirical studies have shown that firms belonging to business groups have a higher propensity to engage in R&D. We demonstrate that this higher propensity depends on the ownership of controlled companies, besides the presence of coordination mechanisms. We develop a model, and we empirically test its predictions using a data set of Italian SMEs operating in the manufacturing sector. From the model we derive three main implications: (1) there is no difference in R&D propensity between standalone firms and firms at the bottom of groups; (2) head and intermediate firms have a higher R&D propensity than standalone firms and firms at the bottom of the group; (3) the intensity of R&D depends on the ownership of controlled firms and on their size. Overall, the results of the empirical analysis are in accordance with the implications of the model. Copyright Springer Science+Business Media New York 2014

Keywords: R&D investment; SMEs; Business groups; Ownership; Knowledge spillovers; D21; L25; O31; O32; L26 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s11187-013-9529-1

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