A bit of basic, a bit of applied? R&D strategies and firm performance

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A bit of basic, a bit of applied? R&D strategies and firm performance Alex Coad1   · Agustí Segarra‑Blasco2   · Mercedes Teruel2  Accepted: 12 September 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020

Abstract Most studies analysing the relationship between R&D and firm growth focus on total R&D investment. This paper aims to analyse separately each component of R&D investment (basic research, applied research and technological development) and evaluate how these types of R&D investment are related to firm growth. Using a sample of 3972 Spanish manufacturing firms during 2004–2015, our empirical results are the following. First, firms have heterogeneous R&D strategies. The common wisdom that young firms invest in basic research, while old firms invest in applied research, is not supported in our data. Second, we investigate the characteristics and dynamics of firms with different R&D strategies. We observe complementarities between applied research and technological development due to their positive associations with firm growth. Finally, our results show that there is a tendency for firms to transition from basic research to applied research. Keywords  Applied research · Basic research · Firm growth · R&D · Technological development · Complementarity · Linear model

Electronic supplementary material  The online version of this article (https​://doi.org/10.1007/s1096​ 1-020-09826​-1) contains supplementary material, which is available to authorized users. * Alex Coad [email protected] Agustí Segarra‑Blasco [email protected] Mercedes Teruel [email protected] 1

Waseda Business School, Waseda University, Bldg. 11 1‑6‑1 Nishi‑Waseda, Shinjuku, Tokyo 169‑8050, Japan

2

GRIT & ECO‑SOS, Department of Economics, Universitat Rovira I Virgili, Av. Universitat, 1, 43204 Reus, Spain



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A. Coad et al.

1 Introduction Various authors have raised concerns about a long-term decline in “corporate science” (Tijssen 2004; Pisano 2010; Arora et  al. 2018), and in particular the decline in basic research investment (Chesbrough 2003). Factors influencing this trend include the growth of technology markets (Arora et al. 2001, 2016; Chesbrough 2003), suspicions of managerial short-termist thinking (e.g., Marginson and McAulay 2008; Asker et al. 2015), possible cost-cutting due to price competition (Autor et al. 2016; Bloom et al. 2016) and financial barriers to innovation projects in particular during early stages of development (Hall 2002; García-Quevedo et  al. 2018). Furthermore, according to Lang (2009), the returns to R&D investments have drastically diminished since the 1960s and they are estimated to have reached an all-time low for the last 45  years. Hence, the increasing riskiness of R&D alongside the lower returns to R&D tend to increase investments that yield shortterm gains at the expense of the long-term. This paper investigates the R&D strategies with a particular interest in the share of basic R&D. The decrease in corporate science should not be neglected