American Economic Review · 2016 · 284 citations · 36 references
Social SciencesBusiness EconomicsEconomicsEconometricsIndustrial OrganizationProduction EconomicsIndustry AnalysisInvestmentMarket ConcentrationMarket EfficiencyProduction TheoryProductivity AnalysisFirm Size DistributionFirm-level ProductivityIndustry Concentration EffectsIndustry DistributionProductivity
The study demonstrates that a simple probabilistic process, where chance influences an unobserved determinant of R&D and firm size conditions returns to R&D, can explain regularities in industry R&D intensity distributions. Using firm data disaggregated by industry, the authors model R&D intensity distributions with this probabilistic process. The model unifies long‑observed relationships among mean R&D intensity, market concentration, and coefficient of variation, and explains the inverse link between R&D productivity and firm size. JEL 031.
Using firm data disaggregated by industry, we establish a set of regularities in the distribution of firm R&D intensities within manufacturing industries. We show how a simple probabilistic process, in which chance influences a key unobserved determinant of R&D and firm size conditions the returns to R&D, can account for these regularities and other features of the distributions. The model provides a unified, noncausal explanation of a series of long-observed relationships across mean R&D intensity, market concentration, and the coefficient of variation. It also offers a novel explanation for the inverse relationship between R&D productivity and firm size. (JEL 031)
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