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Title:Firm growth and R&D expenditure PDF Logo
Authors:Coad, Alexander
Rao, Rekha
Issue Date:2007
Series/Report no.:Papers on economics and evolution 0710
Abstract:We apply a panel vector autoregression model to a firm-level longitudinal database to observe the co-evolution of sales growth, employment growth, profits growth and growth of R&D expenditure. Contrary to expectations, profit growth seems to have little detectable effect on R&D investment. Instead, firms appear to increase their total R&D expenditure following growth in sales and growth of employment. In a sense, firms behave ‘as if’ they aim for a roughly constant ratio of R&D to employment (or sales). We observe heterogeneous effects for growing or shrinking firms however, suggesting that firms are less willing to reduce their R&D levels following a negative growth shock than they are willing to increase R&D after a positive shock.
Subjects:Firm Growth
Panel VAR
R&D expenditure
Industrial Dynamics
JEL:L20
L10
O32
Document Type:Working Paper
Appears in Collections:Papers on Economics and Evolution, MPI für Ökonomik

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