Firm heterogeneity, R&D, and economic growth
- Authors
- Chun, Hyunbae; Ha, Joonkyung; Kim, Jung-Wook
- Issue Date
- Jan-2014
- Publisher
- Elsevier BV
- Keywords
- Firm heterogeneity; R&D; Technological change; Economic growth
- Citation
- Economic Modelling, v.36, pp 149 - 156
- Pages
- 8
- Indexed
- SSCI
SCOPUS
- Journal Title
- Economic Modelling
- Volume
- 36
- Start Page
- 149
- End Page
- 156
- URI
- https://scholarworks.bwise.kr/erica/handle/2021.sw.erica/24118
- DOI
- 10.1016/j.econmod.2013.09.028
- ISSN
- 0264-9993
- Abstract
- In this paper, we establish a link between firm heterogeneity and long-run economic growth both theoretically and empirically. We show that firms' technological heterogeneity creates the diversification effect for R&D financiers, facilitating R&D investment, and thus leading to long-run economic growth. This result holds even when heterogeneity limits the possibility of a synergy effect between firms with similar technologies. In testing the model's prediction using U.S. firm-level data, we define industries with higher firm-specific or idiosyncratic stock return volatility as those exhibiting higher firm-level technological heterogeneity and find a positive link between this measure and R&D intensity. Our paper implies that an economic growth policy aimed at increasing the diversity of the corporate sector may be more effective in attracting private R&D investments than the one aimed at concentration of resources on homogeneous projects due to the foregone diversification benefit of the latter. (C) 2013 Elsevier B.V. All rights reserved.
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