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Volume 8, No. 1,
April 200
9
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Relation
of Firm Size to R&D Productivity
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Jinyoung Kim
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Department of Economics, Korea University,
Korea
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Sangjoon John Lee*
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College of Business, Alfred University, U.S.A.
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Gerald Marschke
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Department of Economics, University at
Albany—SUNY, U.S.A.
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NBER and IZA
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Abstract
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Many studies have shown that small firms generate more
patents per R&D dollar than large firms. Does this
mean that small firms are more efficient innovators than
large firms? In this paper we exploit a unique data set to
reexamine the firm size-innovation relationship. Because
firm-reported R&D expenditures may be a biased measure
of R&D activities due to under-reporting by small
firms, we use the number of inventors in the firm’s employ
as a measure of R&D inputs. We focus on the
pharmaceutical and semiconductor industries, two
industries that are prolific generators of homogenous
innovations. As has been found elsewhere in the
literature, we find that patents per R&D dollar
decline with firm size for both industries. This contrasts
with the relationship between patents per inventor and
firm size. The average number of patents per inventor
increases with size in the semiconductor industry. In the
pharmaceutical industry, we find no relationship between
the number of patents produced per inventor and firm size.
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Key words
:
patents; innovation; labor productivity;
research; firm size
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JEL classification
:
O30; O32; O34; J21; J24
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