The Contribution of International R&D to Firm Profitability
41 Pages Posted: 31 May 2011
Date Written: 2011
Abstract
The internationalisation of corporate R&D opens up the chances to participate in international knowledge sharing. This increasingly motivates firms to accelerate the pace and extent of their international R&D activities in order to enhance innovativeness and consequently competitiveness and profitability. Such business ventures, however, might be associated with huge organizational costs as well as risks of outgoing knowledge spillovers.
In this paper we empirically address the question whether international R&D activities boost profitability. We employ a large data set of about 1300 firms from the German Community Innovation Survey (CIS). The empirical results demonstrate that R&D location matters for profitability. Firms with both domestic and foreign R&D activities make significantly higher profits than all other firms, including those that carry out solely domestic R&D. We furthermore ascertain that the degree of R&D internationalisation affects profitability. Our findings suggest that medium decentralised firms which innovate in two or three foreign countries outperform firms with centralized or highly decentralized international R&D strategies. Notwithstanding, decentralized firms achieve a higher firm performance than firms that solely conduct R&D activities in their home country.
Keywords: R&D, Innovation, Internationalisation, Firm performance, Profit
JEL Classification: O32, F23
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Empirical Studies of Innovation in the Knowledge Driven Economy
By Bronwyn H. Hall and Jacques Mairesse
-
Innovation and Productivity in Smes: Empirical Evidence for Italy
By Bronwyn H. Hall, Francesca Lotti, ...
-
Innovation and Productivity in SMEs - Empirical Evidence for Italy
By Bronwyn H. Hall, Francesca Lotti, ...
-
Using Innovation Surveys for Econometric Analysis
By Pierre Mohnen and Jacques Mairesse
-
The Influence of International Dispersed vs. Home-Based R&D on Innovation Performance
By Bettina Peters and Anja Schmiele
-
Debt Financing, Firm Value, and the Cost of Capital
By Robert S. Harris and Susan Chaplinsky
-
How Well Does Learning-by-Doing Explain Cost Reductions in a Carbon-Free Energy Technology?
-
Innovation and Firm Performance: Evidence from the Capital Market
By Vichet Sum