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Innovation, Firm Size, and R&D Search

Author

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  • Jose Plehn-Dujowich

    (University at Buffalo)

Abstract

We present evidence that small firms perform two to four times more innovations per dollar of R&D than large firms. We propose a search theory of R&D that accounts for the evidence. A firm incurs R&D expenses until it has discovered a level of R&D productivity that is sufficiently great to warrant stopping the search. We show that because the large number of R&D projects run by a large firm becomes a substitute for enhanced R&D productivity, the average R&D productivity of a firm is decreasing in firm size.

Suggested Citation

  • Jose Plehn-Dujowich, 2007. "Innovation, Firm Size, and R&D Search," Economics Bulletin, AccessEcon, vol. 12(18), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-07l20007
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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume12/EB-07L20007A.pdf
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    References listed on IDEAS

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    1. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
    2. Holmström, Bengt, 1989. "Agency Costs and Innovation," Working Paper Series 214, Research Institute of Industrial Economics.
    3. John Bound & Clint Cummins & Zvi Griliches & Bronwyn H. Hall & Adam B. Jaffe, 1984. "Who Does R&D and Who Patents?," NBER Chapters, in: R&D, Patents, and Productivity, pages 21-54, National Bureau of Economic Research, Inc.
    4. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
    5. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
    6. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-583, June.
    7. Zvi Griliches, 1984. "R&D, Patents, and Productivity," NBER Books, National Bureau of Economic Research, Inc, number gril84-1.
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    Cited by:

    1. Christian Rammer & Dirk Czarnitzki & Alfred Spielkamp, 2009. "Innovation success of non-R&D-performers: substituting technology by management in SMEs," Small Business Economics, Springer, vol. 33(1), pages 35-58, June.

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    More about this item

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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