Cohen and Keppler

Only available on StudyMode
  • Topic: Firm, Innovation
  • Pages : 69 (9833 words )
  • Download(s) : 138
  • Published : January 21, 2013
Open Document
Text Preview
Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D
Author(s): Wesley M. Cohen and Steven Klepper
Reviewed work(s):
Source: The Review of Economics and Statistics, Vol. 78, No. 2 (May, 1996), pp. 232-243 Published by: The MIT Press
Stable URL: http://www.jstor.org/stable/2109925 .
Accessed: 14/01/2013 05:08
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp

.
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

.

The MIT Press is collaborating with JSTOR to digitize, preserve and extend access to The Review of Economics and Statistics.

http://www.jstor.org

This content downloaded on Mon, 14 Jan 2013 05:08:04 AM
All use subject to JSTOR Terms and Conditions

FIRM SIZE AND THE NATURE OF INNOVATIONWITHININDUSTRIES:
THE CASE OF PROCESSAND PRODUCT R&D
Wesley M. Cohen and Steven Klepper*
Abstract-The effect of firm size on the allocation of R&D effort between process and productinnovationis examined. It is hypothesizedthat relative to productinnovations,process innovationsare less saleable in disembodiedform and spawn less growth. This implies that the returns to process R&D will depend more on the firm's output at the time it conducts its R&D than the t

returnsto productR&D. Incorporating his distinction in a simple model, we derive and test predictionsabout how the fractionof R&D devoted to process innovation varies with firm size within industries.

o
in determininghecomposition f R&Dthanonlyexogenous
t
industry-level onditions.
c
The findings of Link (1982), Mansfield (1981) and
f
Scherer(1991) all suggestthatwithinindustries, irm size,
m
m
s
and,thus,acrossindustries, arket tructure, ayalso influence the compositionof R&D. Using data for 108 firms industrygroups,Mansfield
spanningtwelve manufacturing
(1981) finds that within industries,the R&D dedicatedto
I. Introduction
o
altogether ew products r processesincreasesless thanpron
OTAL R&D effort has long been viewed in both the portionally ith firm size. Scherer(1991) finds thatamong w
a
popularand academicliteratures s a key determinant manufacturingusinessunitsconsidered s a whole,process a
b
o
p
andindicator f the technological rogressiveness f firms, R&D increasesrelativeto productR&D as the size of the o
industries,and even nations.In recentyears,industrialists, firm increases,with each tenfold increasein businessunit a
a
policymakers nd academicshave increasingly ppreciated sales associatedwith a highly significantten pointincrease the importanceof the compositionof that effort as well. in the percentage f R&D expenditures evotedto process o

d
Americanfirms, for example,have been criticizedfor not innovation.' ink(1982) findsthatamongmoreR&DintenL o
s
devotinga greater hareof theirR&Dto the improvement f sive industries,he shareof R&Ddedicated o processinnot t
incremental vationincreaseswith marketconcentration. ll these findp manufacturingrocesses,for underemphasizing
A
e
development fforts,andfor focusingexcessively on short- ings are provocativebecause they suggest a link at the i
h
termR&Dprojects. apanese olicymakers,n contrast, ave industryevel betweenmarket tructure ndthe composition J
p
s
a
l
in the past expressedconcernthatJapanesemanufacturing of R&D effort, and, hence, the natureof innovation.It is T
firmswerenotconducting noughbasicresearch. hesecon- not clear,however,why firmsize or market tructurehould e
s
s
cerns all suggestthatthe compositionof R&D in manyna- affect the compositionof R&D. tional industries ay not be socially optimal.Before,howm...
tracking img