EconPapers    
Economics at your fingertips  
 

Internal Versus External R&D: A Study of R&D Choice with Sample Selection

James Love and Stephen Roper

International Journal of the Economics of Business, 2002, vol. 9, issue 2, 239-255

Abstract: This paper extends previous analyses of the choice between internal and external R&D to consider the costs of internal R&D. The Heckman two-stage estimator is used to estimate the determinants of internal R&D unit cost (i.e. cost per product innovation) allowing for sample selection effects. Theory indicates that R&D unit cost will be influenced by scale issues and by the technological opportunities faced by the firm. Transaction costs encountered in research activities are allowed for and, in addition, consideration is given to issues of market structure which influence the choice of R&D mode without affecting the unit cost of internal or external R&D. The model is tested on data from a sample of over 500 UK manufacturing plants which have engaged in product innovation. The key determinants of R&D mode are the scale of plant and R&D input, and market structure conditions. In terms of the R&D cost equation, scale factors are again important and have a non-linear relationship with R&D unit cost. Specificities in physical and human capital also affect unit cost, but have no clear impact on the choice of R&D mode. There is no evidence of technological opportunity affecting either R&D cost or the internal/external decision.

Keywords: Scale; Market Structure; Cost Of R And D; R And D Mode (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed

Downloads: (external link)
http://www.tandfonline.com/10.1080/13571510210134998 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:ijecbs:v:9:y:2002:i:2:p:239-255

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CIJB20

DOI: 10.1080/13571510210134998

Access Statistics for this article

International Journal of the Economics of Business is currently edited by Eleanor Morgan

More articles in International Journal of the Economics of Business from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2020-05-06
Handle: RePEc:taf:ijecbs:v:9:y:2002:i:2:p:239-255