Firm Size, University Based Research, and the Returns to R&D

Examines whether the relationship between small firms and university-based research is the reason that small firms are more innovative and produce more significant innovations than large firms. Data for this analysis were collected from 209 firms in the manufacturing industry, identified through the 1986 DUNS file from Dun & Bradstreet. These firms were broken into six groups based on number of employees. Sixty-nine percent of these firms were involved in university-based research. These firms foster these relationships because it allows them to use faculty as technical consultants and provides them access to students who can become future employees. Results indicate that the probability of involvement with university-based research increases with firm size. Further, small firms are better able to transfer the knowledge from this research which increases the returns of their internal R&D activities. Despite the fact that large firms participate in more university-based research, small firms are better at leveraging this research than the larger firms. (SRD)