Performance, Firm Size, and the 'Basicness' of Research

Abstract

Using novel firm-level panel data this paper investigates the relationship between performance, firm size, and the composition of innovative activity. We distinguish between firm-level indicators of applied research using patents and indicators of basic research using scientific publications in 'hard science' journals. We look at total factor productivity and growth as measures of firm performance. Our results indicate that the relation of performance with patents is stronger for small firms than for large firms. By contrast, the relation of performance with scientific publications is stronger for large firms than for small firms. Patenting is beneficial especially to small firms, while publications are by far the strongest indicator of success for large firms. Many small firms appear to publish for non-pecuniary reasons (e.g., a 'taste' for open science). Important differences across technology fields are found.

Keywords: performance, firm size, innovation, patents, scientific publications

JEL Classification: O16, O32, G32, G34