Organization Size plus the Nature of Innovation inside Industries: The truth of Method and Product R& G
Author(s): Wesley M. Cohen and Steven Klepper
Source: The Review of Economics and Figures, Vol. 78, No . two (May, 1996), pp. 232-243 Published simply by: The MIT Press
Stable URL: http://www.jstor.org/stable/2109925.
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FIRM SIZE AS WELL AS THE NATURE OF INNOVATIONWITHININDUSTRIES:
THE TRUTH OF PROCESSAND PRODUCT R& D
Wesley M. Cohen and Steven Klepper*
Abstract-The effect of organization size for the allocation of R& Deb effort between process and productinnovationis examined. It is hypothesizedthat relative to productinnovations, process innovationsare less saleable in disembodiedform and spawn less growth. This implies the returns to process R& D depends more on the firm's result at the time it conducts the R& D than the big t
returnsto productR& D. Incorporating his distinction in a basic model, we all derive and test predictionsabout how the fractionof R& M devoted to process innovation varies with company size within just industries.
in determininghecomposition f R& Dthanonlyexogenous
The findings of Link (1982), Mansfield (1981) and
Scherer(1991) almost all suggestthatwithinindustries, irm size,
and, thus, acrossindustries, arket tructure, ayalso influence the compositionof R& D. Applying data pertaining to 108 organizations industrygroups, Mansfield
(1981) finds that within just industries, the R& Deb dedicatedto
altogether ew products r processesincreasesless thanpron
OTAL R& D work has long been looked at in both portionally ith firm size. Scherer(1991) detects thatamong w
popularand academicliteratures s a key determinant manufacturingusinessunitsconsidered s a whole, process a
andindicator n the scientific rogressiveness n firms, R& D increasesrelativeto productR& Deb as how big the o
industries, and nations. In recentyears, industrialists, firm raises, with every single tenfold increasein businessunit a
policymakers nd academicshave increasingly ppreciated sales associatedwith a highly significantten pointincrease the importanceof the compositionof that effort too. in the percentage f R& D costs evotedto procedure o
Americanfirms, for example , have been criticizedfor not advancement. ' ink(1982) findsthatamongmoreR& DintenL o
devotinga higher hareof theirR& Dto the improvement f sive industries, he shareof R& Ddedicated to processinnot big t
incremental vationincreaseswith marketconcentration. lmost all these findp manufacturingrocesses, pertaining to underemphasizing
creation fforts, andfor focusingexcessively about short- ings are provocativebecause they recommend a link in the i
termR& Dprojects. apanese olicymakers, n compare, ave industryevel betweenmarket tructure ndthe composition J
in past times expressedconcernthatJapanesemanufacturing of R& D effort, and, hence, the natureof innovation. It is Capital t
firmswerenotconducting noughbasicresearch. hesecon- not clear, however , so why firmsize or perhaps market tructurehould e
cerns all suggestthatthe compositionof R& D in manyna- impact the compositionof R& D. tional industries ay not end up being socially ideal. Before, howm...
References: big t
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19Extendingthis theme further, we certainly have arguedelsewhere (Cohen and Klepper (1992b, 1996)) thatfor similarreasons it is also perilousto make inferences
In related work (Cohen and Klepper (1992b)), we suggest that you will discover
exogenously determinedR& D-relatedcapabilitiesthat change across firms and
twenty-three Klepper (1996) builds as well as extends these kinds of ideas within a dynamic model
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