UNU-MERIT Working Papers Series

The medium-term effect of R&D on firm growth

Marco Capasso, Tania Treibich & Bart Verspagen #2014-001

This study analyses the medium-term effect of R&D expenditure on firm employment growth. Four cross-sectional waves of an innovation survey conducted in the Netherlands have been used to evaluate the effect on firm growth in the five years following the investment. Panel data fixed effect techniques, also allowing for selection bias corrections, indicate a positive influence of R&D on growth. Limited dependent variable models have been used throughout the whole analysis to consider explicitly the cases of firms exiting the market in the analysed medium term.

Keywords: firm growth; R&D expenditure; industrial dynamics; panel Tobit models

JEL classification: L20, L10, O32

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