Volume 29, Issue 4, 2020

DOI: 10.24205/03276716.2020.819

Does R&D Improve Productivity? Evidence from Asian Biotech Firms

Empirical evidence on the contribution of R&D on productivity and efficiency has produced mixed results. Using 141 Asian biotech firms, this study employs the smooth coefficient quantile model to empirically test the hypothesis that firms with different levels of efficiencies have distinct capabilities to absorb the contribution of R&D on productivity. The empirical results support the hypothesis that firm with higher efficiency levels do have larger capability to absorb the contribution of R&D to their productivity. In addition, firms operated on the extremely lower efficiency levels may acquire insignificant or negative influence of R&D on productivity. Other empirical findings include: (i) R&D activity promotes labor productivity and degrades capital productivity for firms associated with extremely higher efficient levels regardless of R&D levels; (ii) if firms operate on the lower efficiency levels, the relationship between R&D and output elasticity of labor appears U-shaped, while it becomes inversely Ushaped between R&D and output elasticity of capital; and (iii) if firms invest enough R&D expenditures, R&D activity augments the labor productivity and lessen the capital productivity, regardless of efficiency levels.

Quantile regression, smooth coefficient quantile model, Asian biotech firms, R&D, production efficiency quantile.

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