Journal Empirica
Publisher Springer Netherlands
ISSN 0340-8744 (Print) 1573-6911 (Online)
Subject Business and Economics
Issue Volume 19, Number 2 / September, 1992
DOI 10.1007/BF00924959
Pages 161-180
Online Date Monday, January 03, 2005



Abstract  The focus of this paper is an econometric analysis of the determinants of private firms'' R&D activities in the context of a general dynamic factor demand model. Besides the traditional production factors we treat technological knowledge, endogenously determined by R&D expenditures, as a further input factor. While labour and materials are assumed to be variable, capital and know-how are considered as quasi-fixed. The dynamic demand equations for labour, capital investment and R&D which are derived from an intertemporal cost minimisation are estimated for a panel data set of small and medium size German firms. The data covers the period between 1978 and 1982 and includes 408 firms. It turns out that R&D activity depends on the underlying production structure as suggested by neoclassical theory. In addition, by introducing firm specific effects, we can show that firm size and market concentration influence innovative behaviour in accordance with the Schumpeterian hypotheses.
Paper presented at the Industrial Organization Conference at the Annual Meeting of the Austrian Economic Association, Vienna, June 2426, 1992, the 7th Annual Congress of the European Economic Association, Dublin, August 2931, 1992, and the 19th Annual Conference of the EARIE, Stuttgart, September 46, 1992. Helpful suggestions and comments were received from participants of these conferences as well as from seminar participants at Temple University, at the University of Augsburg, and at the fourth DFG workshop ldquoMarktstruktur und gesamtwirtschaftliche Entwicklungrdquo in Munich. We are particularly indebted to an anonymous referee for very helpful specific comments. Finally, we would like to thank Horst Albach for providing us with the panel data set. Financial support of the DFG is gratefully acknowledged.