Do R&D strategies in high-tech sectors differ from those in low-tech sectors? An alternative approach to testing the pooling assumption

Bettina Becker, Stephen G. Hall

Research output: Contribution to journalArticle

Abstract

Most studies investigating the determinants of R&D investment consider pooled estimates. However, if the parameters are heterogeneous, pooled coefficients may not provide reliable estimates of individual industry effects. Hence pooled parameters may conceal valuable information that may help target government tools more efficiently across heterogeneous industries. There is little evidence to date on the decomposition of the determinants of R&D investment by industry. Moreover, the existing work does not distinguish between those R&D determinants for which pooling may be valid and those for which it is not. In this paper, we test the pooling assumption for a panel of manufacturing industries and find that pooling is valid only for output fluctuations, adjustment costs and interest rates. Implementing the test results into our model, we find government funding is significant only for low-tech R&D. Foreign R&D and skilled labour matter only in high-tech sectors. These results suggest important implications for R&D policy.
Original languageEnglish
Pages (from-to)183-202
Number of pages20
JournalEconomic Change and Restructuring
Volume46
Issue number2
Early online date24 Feb 2013
DOIs
Publication statusPublished - May 2013

Keywords

  • research and development
  • pooling
  • panel data estimation

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