An analysis of the micro- and macro-economic determinants of firm R&D intensity in the South African business sector

Figures & data

Table 1: Data description.

Variable	Measurement	Source	Expected sign
R&D intensity	R&D expenditure as a percentage of turnover	R&D Survey
Firm size	Log of turnover	R&D Survey	–/+
Collaboration	Dummy variable indicating R&D collaboration inside SA: Yes = 1; No = 0	R&D Survey	+
Human capital	Log number of employees with graduate degree	R&D Survey	+
R&D tax incentive	Dummy variable indicating that the firm claimed a tax incentive: Yes = 1; No = 0	R&D Survey	+
Source of funding from the government	Dummy variable indicating that the firm received government funding: Yes = 1; No = 0	R&D Survey	+
Public R&D spending	Public R&D spending as a % of GDP	SARB	–/+
Domestic investment	Gross fixed capital formation as a % of GDP	World Bank	–/+
FDI	Capital inflow as a % of GDP	World Bank	–/+
Trade openness	Sum of exports and imports as a % of GDP	SARB	–/+
Private investment	Gross fixed capital by business & enterprises as a % of GDP	SARB	–/+
GDP growth rate	Real GDP growth rate	SARB	+
Political instability^2	Political instability	World Governance Index	–

Table 2: Descriptive statistics.

Variable	Mean^3	Max	Min	Standard deviation
R&D intensity	10.67	100	0.00002	18.50
Firm size	19.23	6.91	31.19	3.32
Collaboration	0.2	1	0	0.400
Human capital	10.49	2276	0	58.1
R&D tax incentive	0.22	1	0	0.41
Public R&D investment	0.16	0.17	0.14	0.01
Source of funds from government	0.17	1	0	0.38
Investment	20.19	18.8	23.5	1.35
FDI	1.49	3.45	0.48	0.93
Private investment	15.48	18.63	12.08	2.23
Trade openness	58.78	62.92	52.83	2.63
GDP growth rate	1.75	3.284	−1.54	1.41
Political stability	−0.09	0.05	−0.28	0.1

Data sources: R&D Survey, World Bank, SARB, World Governance Index

Figure 1: Trends in average firm R&D intensity, public R&D spending, FDI and GDP growth rate.

Table 3: Correlation matrix

	FS	CB	HC	TX	PB	SG	DI	TO	PI	RG	PS
FS	1
CB	0.026	1
HC	0.13***	0.06***	1
TX	0.04*	0.14***	0.08***	1
PB	−0.05***	−0.1***	−0.03	−0.15***	1
SG	−0.1***	0.02	−0.02	−0.1***	0.15***	1
DI	−0.048*	−0.10***	−0.07***	−0.13***	0.511***	0.27***	1
TO	0.014	0.024	0.009	−0.01	0.27***	−0.07***	0.24***	1
PI	0.05***	0.06***	0.07***	0.08***	0.22***	−0.26***	−0.36***	0.56***	1
RG	0.027	0.058***	0.012	0.031***	−0.394***	−0.05***	−0.06***	0.51***	−0.05*	1
PS	−0.017	−0.017	−0.05***	−0.05***	−0.42***	0.16***	0.35***	0.027***	−0.72***	0.56***	1

Data sources: R&D Survey, World Bank, SARB, World Governance Index

Notes: Sig. level *** 1%, **5% and *10%.

FS = firm size; CB = collaboration within South Africa; HC = human capital; TX = use of tax incentive; PB = public R&D expenditure; SG = source of funds from the government; DI = domestic investment; TO = trade openness; PI = private investment; RG = real GDP growth; PS = political stability.

Table 4: Results of the two-step system GMM.

Variable	Short-run coefficient	Long-run coefficient^4
R&D intensity [1]	0.14***
Firm size	−0.7***	−0.82***
Collaboration inside SA	0.12*	0.14*
Human capital	0.004**	0.005**
Tax incentive	0.45***	0.52***
Public R&D investment	2.2*	2.56*
Source of funds from government	0.560***	0.695***
Domestic investment	−2.822
Foreign direct investment	0.367*	0.428*
Private investment	−2.865*	−3.334*
Trade openness	9.584
Real GDP growth	−0.0151
Political stability	−1.864*	−2.17*
C	−4.788

Data sources: R&D Survey, World Bank, SARB, World Governance Index

Notes: Sig. level *** 1%, **5% and *10%.

Table 5: Diagnostic tests.

Test	Statistic
Hansen test of overidentifying restrictions	Prob > chi2 = 0. 269
Difference-in-Hansen tests of exogeneity of instrument subsets	Prob > chi2 = 0. 606
AR(1) in first differences	z = −3.74: Pr > z = 0.000
AR(2) in first differences	z = 0.10: Pr > z = 0.920
Number of instruments = 61 Number of groups: 603
F(12, 602) = 161.00 Prob > F = 0.000

Source: Authors’ computation