Firm size and types of innovation

J. M. Plehn-Dujowich

Economics of Innovation and New Technology, 2009, vol. 18, issue 3, 205-223

Abstract: We propose a general theory of innovation that illustrates the relative benefits of performing process versus product R&D when firm size is endogenous. A firm's size, scope, and R&D portfolio are shown to reflect the same underlying characteristic of the firm, namely manufacturing efficiency. We demonstrate that efficient firms become larger, have greater scope, and perform more of both process and product R&D. In light of decreasing returns to R&D, this implies small firms obtain more product innovations per dollar of R&D than large firms, which is consistent with evidence we present that small firms are more innovative than large firms as they obtain more patent counts and citations per dollar of R&D.

Keywords: firm size distribution; technological change; R&D portfolio (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (15)

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DOI: 10.1080/10438590701785850

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