Complementarities of R&D strategies on innovation performance: Evidence from Taiwanese manufacturing firms

Abstract

This paper aims to empirically test the R&D complementarities among three alternative R&D strategies, namely, internal R&D, external R&D and cooperative R&D, under different measures of innovation output. Using a firm-level data set based on the Taiwanese innovation survey (in accordance with CIS 3) conducted in 2003, we are able to compare the R&D activities in this newly-industrialized country with other developed countries. Additionally, we apply a two-step procedure to reduce the endogeneity problem caused by the firms’ choices of strategies to obtain consistent estimators, which can be regarded as a combined method of adoption and productivity approaches. We show that the results of the estimation for R&D complementarities may be biased upwards or downwards if we do not include selection equations in the empirical models, thereby giving rise to endogeneity problems. Our empirical results generally support the existence of R&D complementarities, while the strength of complementary effects may vary across different measures of innovation output. Moreover, our finding suggests that the complementary relationship between external and cooperative R&D is fairly robust to various model specifications.

Keywords:

• R&D strategy
• innovation
• complementarities
• multivariate probit model

JEL Classification:

• D83
• C35
• O32

Additional information

Notes on contributors

Eric S. Lin

Eric S. LIN, BA in Economics (National Taiwan University, 1993); MA in Economics (National Taiwan University, 1995); PhD in Economics (University of Texas at Austin, 2004); Professor, Department of Economics, National Tsing Hua University (2013). His research and publications are in the areas of economic forecasting, industrial economics, labor economics, and defence economics.

Yi-Chi Hsiao

Yi-Chi HSIAO, BA in Economics (National Central University, 2002); MA in Economics (National Taiwan University, 2004; University of Texas at Austin, 2008). Now he is a PhD student in the Department of Strategy and Management at National Taiwan University. Research interests include applied econometrics and industrial organization.

Hui-lin Lin

Hui-lin LIN is a Professor at the Department of Economics and the Dean of Social Sciences, National Taiwan University. She earned PhD from Brown University at USA in May 1991. She has been a professor of economics for 20 years. She has published many articles in international journal and 5 books in Taiwan. Her research focuses on econometrics, industrial economics and economic innovation.