Corporate R&D and firm efficiency: Evidence from Europe's top R&D investors

S.C. Kumbhakar, R. Ortega-Argilés, Lesley Potters, Marco Vivarelli, Peter Voigt

Research output: Contribution to journalArticlepeer-review


The main objective of this study is to investigate the impact of corporate research and development (R&D) activities on firm performance, measured by labour productivity. To this end, the stochastic frontier technique is used on a unique unbalanced longitudinal dataset comprising top European R&D investors over the period 2000-2005. In this framework, this study quantifies technical inefficiency of individual firms. From a policy perspective, the results of this study suggest that if the aim is to leverage firms' productivity, the emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. On the other hand, corporate R&D in the low-tech sector is found to have a minor effect in explaining productivity. Instead, encouraging investment in fixed assets appears important for the productivity of low-tech industries. Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an 'erga omnes' approach across all sectors appears inappropriate. However, with regard to technical efficiency, R&D intensity is found to be a pivotal factor in explaining firm efficiency and this turns out to be true for all industries.
Original languageEnglish
Pages (from-to)125-140
Number of pages16
JournalJournal of Productivity Analysis
Issue number2
Publication statusPublished - 11 May 2011


  • Corporate R&D
  • Productivity
  • Stochastic frontier analysis
  • Technical efficiency


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