Proceedings of the 2nd Economics & Finance Conference, Vienna

EFFECT OF R&D ON FIRMS’ GROWTH: DISCREPANCY BETWEEN SALES GROWTH AND EMPLOYMENT EXPANSION

DONGHYUK CHOI, JOSEPH KANG, CHIYONG KIM

Abstract:

In this paper, we analyze the effect of firms’ R&D investment on sales growth and employment expansion. We attempt to shed light on the R&D investment effect by comparing the difference of R&D influence on these two growth dimensions. The estimation results of the panel fixed-effect model show that the previous year’s R&D investment has a significant and positive association with the current year’s sales growth but does not result in significant employment expansion. We also conduct a two-digit industry-level analysis based on the Korean Standard Industrial Classification (KSIC), using a quantile regression model, to examine how the discrepancy between sales growth and employment expansion differs between industries. Among various manufacturing industries, high-tech industries such as electronics are characterized by large discrepancies. Based on the estimation results, we discuss industrial policies for sustainable growth when a nation such as South Korea follows a high-growth strategy by increasing the rate of R&D investment.

Keywords: R&D, firm growth, sustainable growth

PDF: Download