Firm size, university based research, and the returns to R&D

✍ Scribed by Albert N. Link; John Rees

• Publisher: Springer US
• Year: 1990
• Tongue: English
• Weight: 513 KB
• Volume: 2
• Category: Article
• ISSN: 0921-898X
• DOI: 10.1007/bf00389891

✦ Synopsis

This paper compares university-based research relationships between small and large firms as an explanation for the difference in innovative activity across firm sizes. We test the hypothesis that there are diseconomies of seale in producing innovations in large firms due to the inherent bureaucratization process which inhibits both innovative activity as weil as the speed with which new inventions move through the corporate system towards the market. By utilizing university-based research relationships, small firms are able to avoid bureaucratic inefficiencies.

I. lntroduetion

Over the past decade scholars have studied the role of small-sized firms in the innovation process. A number of important conclusions have come forth as a result of these inquiries. ~ First, small firms are more innovative (in terms of the number of product innovations) relative to their size than large firms. Second, product innovations coming from small firms appear to be more significant than those coming from large firms. Surprisingly, no studies to date have sought to explain, or even speculate, why small firms have this innovationrelated advantage. 2

This paper compares university-based research relationships between small and large firms in an effort to identify one factor that might explain this noted difference in innovativeness. Our hypothesis is that innovation-based diseconomies of scale exist in large firms owning to the fact that bureaucratization in the innovation decision making