Top R&D investors, structural change and the R&D growth performance of young and old firms

Abstract

This paper investigates the structural change of the major economies through the lens of the leading global corporate R&D investors. Moreover, we explore the relationship between R&D intensity, capital intensity and profitability and R&D investment growth for young and old firms. Contrary to common understanding, our results show that in the EU the R&D distribution between sectors has changed – similar to the USA; however, the USA has experienced a very strong shift towards ICT-related sectors, which makes its change more visible. Both the EU and the USA have experienced a slower pace of structural change than emerging economies. Our results also indicate that capital and R&D intensity may have a complementary effect on long-term R&D performance, which can vary according to a firm’s age. The specific nature of the sample allows us to link our results to the Schumpeterian waves of innovation and the changes of techno-economic paradigms rather than alternative interpretation of management literature. Policy implications are discussed accordingly.

Investment expectations by vulnerable European firms in times of COVID

“…Further analysis (results presented in Appendix OSM2) shows that R&D investors are also pessimistic about their industry’s business prospects, which could be problematic given that R&D investment is procyclical and that a drop in economic confidence could lead to a decrease in R&D investment (Barlevy, 2007 ; Roper & Turner, 2020 ). In fact, EU companies have decreased their R&D investment for the first time in 10 years (Grassano et al, 2021 ), which could contribute to widening further the gap between the US and EU (Moncada-Paternò-Castello, 2022 ). Other areas of concern for policy makers could be the availability of external finance for HGEs.…”

“… R&D investors vs non-investors. R&D investment contributes to innovation and economic growth, and as a result policymakers seek to encourage R&D investment (Moncada-Paternò-Castello, 2022 ; Zhang & Mohnen, 2022 ). Nevertheless, R&D investors are vulnerable in many dimensions: sensitive to uncertainty and long payback times in their innovation investment projects, having low levels of collateral and vulnerable to information asymmetries when seeking finance.…”

The Effective Measure of R&D Success and Future Research Direction

“…Investment in research and development (R&D) is crucial to the long-term success of firms (Goel & Nelson, 2022) and governments (Moncada, 2022), and has increased dramatically over time (O'Connell et al, 2018). According to Chen & Huang (2019), R&D success is the successful transition of research findings into novel goods, processes, or technologies, producing enormous economic value.…”

A Nexus Among Technology Input, Research Activity, Innovation, and Economic Growth: A vis-à-vis Analysis between Asia and Europe

“…It is well established that technological development and innovation capability are the main drivers of incremental growth across various industry sectors. Knowledge accumulation and its diffusion directly impact the development of abilities within firms and the evolution of industrial structures as a whole [Moncada-Paternò-Castello, 2022].…”