The Determinants of R & D Expenditure of the Firms: Evidences from a Cross-section of Indian Firms

This article examines the role of firm size and industry structure on the Research and Development (R&D) intensity of the firm. Using the data for a cross-section of Indian firms for the year 2004, we analyse the above questions using the Tobit framework. Using the input based measurement of R&D intensity; we found that there exists an increasing relationship between the probability of a firm taking up R&D activity and its size. The market share and human capital (proxied by wages) also increase the probability of taking up R&D activity. However we failed to find any significant impact of market concentration and export orientation on firm’s R&D intensity. * Department of Economics, Monash University, Caulfield East, Vic, 3145. [email protected] † The author wants to thank Dr. Mita Bhattacharya (Monash University), Dr. David Prentice (La Trobe University) and participants of 4th Summer Workshop in Industrial Organization in Auckland (SWIO-2006) for their valuable comments and suggestions at various stages of this work. © 2007 Vinod Mishra All rights reserved. No part of this paper may be reproduced in any form, or stored in a retrieval system, without the prior written permission of the author. THE DETERMINANTS OF R & D EXPENDITURE OF THE FIRMS: EVIDENCES FROM A CROSS-SECTION OF INDIAN FIRMS