Predicting R&D investment with ex ante productivity

Ziemowit Bednarek

Applied Economics Letters, 2014, vol. 21, issue 15, 1079-1082

Abstract: In this article I demonstrate the relationship between research and development expenditure and firm productivity. Using data envelopment, I construct a measure of the firm-level distance from the industry-wide productivity frontier. Firms ex ante further from the productivity frontier invest more in R&D. On average, a 1% larger distance from the frontier causes a 0.6% to 1.2% increase in the R&D intensity next quarter. The effect is statistically and economically significant.

Date: 2014
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DOI: 10.1080/13504851.2014.909567

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