Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 240: Innovation Strategy and Firm Performance What is the long-run impact of persistent R&D?

Johansson Börje () and Lööf Hans ()
Additional contact information
Johansson Börje: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Lööf Hans: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Abstract: There are systematic long-run differences in the performance of firms explained by the R&D-strategy that each firm employs. Controlling for unobservable heterogeneity, past performance and other firm characteristics, this paper shows that labour productivity is, on average, 13 percent higher among firms with persistent R&D commitment and 9 percent higher among firms which make occasional R&D efforts when compared with non-R&D-firms. Furthermore, firms which employ a strategy with persistent R&D efforts are rewarded with a productivity growth rate that on average is about 2 percent higher than for other firms. The results are similar when firm performance is measured as total sales or exports per labor input.

Keywords: R&D; Innovation-strategy; productivity; export; dynamic panel-data

JEL-codes: C23; O31; O32

28 pages, September 7, 2010

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