Investigation of ICT Firms' Decisions on R&D Investment

The formulation of a macroeconomic model applied to the analysis of EU Research and Development (R&D) funding strategies in Information and Communication Technology (ICT) under the PREDICT 2 project stipulates a specification of the transmission mechanism of R&D funding policy on firms' R&D expenditures. To enlighten the understanding of ICT firms' investment decisions, the effect of various firm characteristics on firms' R&D activities is analysed on a representative sample of ICT sector firms in 16 EU member countries. The analysis covers two aspects of the firms' R&D activity. Firstly, R&D engagement characterising those firms which undertake in-house R&D projects on a continuous basis, and secondly, R&D expenditure measured as the firms' in-house expenditure on R&D projects per employee. The report finds that reception of public funding is positively related to ICT firms' R&D activity. The relation between public funding and firms' R&D activity is found to depend on funding sources. The results also show that national and international diffusion of knowledge through firms' cooperation with other enterprises and through international trade plays an important role for firms R&D activity. Finally, the results suggest that substantial differences exist in firms' R&D activity across countries and sectors.