The impact of R&D strategy and firm size on the returns to innovation

Using a firm-level dataset of manufacturing firms, this study examines the economic returns to RD in the UK. It contributes to the literature of innovation by investigating two firm-specific characteristics (firm size and RD strategy) that may influence what a company itself gets for its own research efforts (private returns to RD). The findings indicate that, on average, the rate of return to RD is 0.33. However, the results show that the economic payoff for larger firms as well as for organisations that followed an RD-intensive strategy is significantly higher, allowing such firms to improve their corporate performance. In contrast, the analysis indicates that less RD-intensive and smaller firms cannot successfully appropriate the economic benefits of industrial research. The implications of these findings for academic research and regional economic development are discussed.