R&D Productivity in the Personal Computer Industry

27 Pages Posted: 10 Jan 2002

See all articles by Gary Erickson

Gary Erickson

University of Washington - Michael G. Foster School of Business

Barry L. Bayus

University of North Carolina Kenan-Flagler Business School

Date Written: December 2001

Abstract

We empirically study the dynamics of R&D productivity by firm size over an industry's life cycle. To do this, we examine the relationship between R&D expenditures, firm size, and new product introductions at the firm level in the personal computer industry. In general, we find the following. (1) Although R&D productivity generally shows decreasing marginal returns to additional expenditures, small firms have increasing returns to R&D efforts in the introductory stage of the industry life cycle. (2) In the early part of the industry life cycle, small firms exhibit greater R&D productivity than large firms. However, this is reversed as the industry approaches maturity when large firms have higher R&D productivity than smaller firms. (3) R&D productivity generally decreases over time, indicating diminishing innovation opportunities as the industry matures. Thus, our results suggest that an advantage of size occurs in the long run as higher R&D productivity later in the industry life cycle. We argue that this higher R&D productivity may come from larger firms being able to spread their R&D expenditures over a longer product line.

Keywords: R&D Productivity, Poisson Regression

JEL Classification: O3; L0

Suggested Citation

Erickson, Gary M. and Bayus, Barry, R&D Productivity in the Personal Computer Industry (December 2001). Available at SSRN: https://ssrn.com/abstract=296228 or http://dx.doi.org/10.2139/ssrn.296228

Gary M. Erickson

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Barry Bayus (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599
United States
919-962-3210 (Phone)

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