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How to Increase R&D in Transition Economies? Evidence from Slovenia

Polona Domadenik (), Janez Prašnikar () and Jan Svejnar
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Polona Domadenik: University of Ljubljana
Janez Prašnikar: University of Ljubljana

No 2801, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Paper addresses the recent initiatives of EU Lisbon Agenda to increase level of R&D expenses in EU Member States by studying firm-level panel data in most advanced transition economy, Slovenia. Previous empirical literature – mainly cross-sectional – has tested the demand-pull hypothesis and found in overall that R&D expenses may be driven by output. Using a panel of over 150 Slovene firms over the 1996-2000 period, and checking for fixed effects, time, industrial and size dummies and for the path-dependent nature of R&D, we also find a significant role of sales in inducing R&D expenditures. Besides that data also confirm that internal funds and (un)successful bargaining for higher wages present significant variables for higher R&D expenses. However, at the micro level, the demand-pull, internal funds and bargaining effects play a varying role for the different sub-samples of firms. In particular, exporting firms, those which are liquidity-constrained, those not receiving public subsidies and those not heading a business group, seem to be particularly sensitive in deciding their R&D expenditures. R&D behavior at the firm level is modeled as error-correction model and estimated in system GMM specification.

Keywords: institutions; openness; R&D investment; firms in transition; transition; employee ownership and control (search for similar items in EconPapers)
JEL-codes: C33 D01 L2 O31 P2 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2007-05
New Economics Papers: this item is included in nep-eec, nep-ino and nep-tra
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Published - published in: Review of Development Economics, 12(1), 193-208

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