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Corporate diversification and R&D intensity dynamics

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Abstract

We study the dynamic bidirectional relationship between firm R&D intensity and corporate diversification, using longitudinal data of Spanish manufacturing companies. Our empirical approach takes into account the censored nature of the dependent variables and the existence of firm-specific unobserved heterogeneity. Whereas we find a positive linear effect of R&D intensity on related diversification, the evidence about the effect of related diversification on R&D intensity takes the form of an inverted U. Hence, the effect of related diversification on R&D intensity is positive but marginally decreasing for moderate levels of related diversification, but such effect can turn out negative for high levels of related diversification. Additionally, the consequences of the dynamic relation are that the effects are substantially larger in the long-run than in the short-run.

Suggested Citation

  • Forcadell, Francisco Javier, 2007. "Corporate diversification and R&D intensity dynamics," UC3M Working papers. Economics we078249, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:we078249
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    More about this item

    Keywords

    R&D Intensity;

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models

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