Related Diversification and R&D Intensity Dynamics Articles uri icon

publication date

  • May 2010

start page

  • 537

end page

  • 548

issue

  • 4

volume

  • 39

International Standard Serial Number (ISSN)

  • 0048-7333

Electronic International Standard Serial Number (EISSN)

  • 1873-7625

abstract

  • Using longitudinal data of Spanish manufacturing companies, we study the dynamic, bidirectional relationship between firm research and development (R&D) intensity and corporate diversification in an organic growth setting. Our empirical approach accounts for the different sources of endogeneity. Although we find a positive linear effect of R&D intensity on related diversification, the effect of related diversification on R&D intensity assumes the form of an inverted U. Thus, the effect of related diversification on R&D intensity is positive, but marginally decreases for moderate levels of related diversification. Such an effect can become negative, however, for high levels of related diversification. Additionally, as a consequence of dynamics, the effects after one year are substantially lower than the overall effects that occur over several years.