Title: Firm size, R&D expenditure, and international orientation: an empirical analysis of performance of Indian firms

Authors: Abhishek Kumar Sinha; Aswini Kumar Mishra; Yash Patel

Addresses: Department of Economics, BITS, Pilani K K Birla Goa Campus, Zuarinagar 403726, Goa, India ' Department of Economics, BITS, Pilani K K Birla Goa Campus, Zuarinagar 403726, Goa, India ' Department of Economics, BITS, Pilani K K Birla Goa Campus, Zuarinagar 403726, Goa, India

Abstract: We examine the Schumpeterian hypothesis that large firms have an advantage in research and development. Using CMIE Prowess data of S&P BSE index, the firms are segregated as per the market capitalisation into large, mid and small cap firms. We analyse the financial performance of these firms for the post-reform period in India (1992-2017). The study finds that the R&D expenditure has statistically significant effects on firms' total income when either fixed industry effects or fixed year effects are taken into account. The income of the firms is also determined by the export earnings and total imports but with less impact than R&D. The results also show that outward-oriented firms have a greater tendency to spend on research and development expenses. Results from quantile regression suggest that the firms in the higher quantile have statistically higher significant effects of R&D expenditure and outward orientation, on firms' total income than the firms in the relatively lower quantile.

Keywords: R&D expenditure; R&D intensity; firm performance; firm size; exports; S&P BSE index; industry fixed effects; year fixed effects; outward orientation; quantile regression.

DOI: 10.1504/IJTLID.2019.106604

International Journal of Technological Learning, Innovation and Development, 2019 Vol.11 No.4, pp.311 - 336

Received: 21 Jun 2019
Accepted: 23 Nov 2019
Published online: 15 Apr 2020 *

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