Norges Bank

Working Paper

R&D heterogeneity and its implications for growth

Sigurd Mølster Galaasen and Alfonso Irarrazabal
Working Paper


This paper quantifies the determinants of heterogeneity in R&D investment and its implications for growth. Using a panel of Norwegian manufacturing firms we document a negative correlation between R&D intensity and firm size, driven mainly by small firms with high R&D intensity. We estimate a Schumpeterian growth model with heterogeneous firms, that differ with respect to innovation efficiency. The estimated model fits the shape of the R&D investment distribution as well as the negative correlation between R&D intensity and firm size. A larger selection effect contribution to aggregate growth is found when we include R&D moments in the estimation. Finally, we study the link between firm heterogeneity and R&D subsidies, and show that the growth effects of subsidies depend crucially on how the policy influences the equilibrium distribution of firms.

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ISSN 1502-8190 (online)

Published 29 September 2016 09:15
Published 29 September 2016 09:15