Cohen and Keppler
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
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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
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
References: t shipbetweenfirmsize andinnovation, hatof Jewkes,SawPrincetonUniversity Press, 1962). ers and Stillerman(JSS) (1958). In a view subsequently Baldwin, William L., and John T. Scott, MarketStructureand Technological A Chur:H echoed by Nelson, Peck and Kalachek (1967), Scherer Cohen,Change (M., and arwoodKcademic Publishers, 1987). (1980) andDorfman(1987), and Diversity in the Pursuitof TechnologicalProgress,"SmallBusiness Economics 4 (1992a), 1-14. by size,character , "A Reprise of Size and R&D," Economic Journal (1996, forthcoming). of whatconditions hedivisionof "innovative abor"across Dosi, Giovanni, "Technological Paradigmsand Technological Trajectories," Research Policy 11 (1982), 147-162. determinationf the mix of innovativeactivitiesacrossall Freeman,Christopher,The Economicsof IndustrialInnovation,2nd ed. (Cambridge, MA: MIT Press, 1982). provide a startingpoint-distinct from that of JSS-for 19Extendingthis theme further,we have arguedelsewhere (Cohen and Klepper (1992b, 1996)) thatfor similarreasons it is also perilousto make inferences In related work (Cohen and Klepper (1992b)), we suggest that there are exogenously determinedR&D-relatedcapabilitiesthat differ across firms and 23 Klepper (1996) builds on and extends these ideas in a dynamic model p Journal of Political Economy 93 (1985), 837-858. Jewkes, John,David Sawers, and RichardStillerman,The Sources of Invention (London:Macmillan, 1958). Innovationand MarketFailure," American Economic Review (1996). Paper-son Economic Activity (1987), 783-820. ProcessInnovation,"in DevendraSahal(ed.), TheTransferand Utilization of TechnicalKnowledge(Lexington,MA: LexingtonBooks, 1982). Mansfield,Edwin, "Composition of R&D Expenditures:Relationshipto Size of Firm,Concentration, ndInnovativeOutput,"this REVIEW63 (1981),