The medium-term effect of R&D on firm growth

This study analyses the effect of r&d expenditure on firm employment growth in the medium term, using six cross-sectional waves of an innovation survey conducted in the netherlands in all sectors. The analysis is focused on firms having positive r&d expenditure and investigates whether higher investments in r&d (in proportion to firm turnover) translate into higher medium-term growth rates. Comparisons with growth on a shorter term are conducted by following the firm size evolution since the r&d investment for five consecutive years and allowing for firm exit. At all time terms, quantile regression techniques indicate that a higher r&d has a positive effect on high growers and allows a higher number of firms to be high growers. Still, once a firm invests in r&d, even if a higher investment makes the firm more likely to have a very good performance, it does not make it less likely to have a bad one.