Research, development, and firm growth. Empirical evidence from European top R&D spending firms

Following recent literature, we present a model of endogenous firm growth with R&D investment as one of the main mechanisms of growth. Our study evidences a positive effect of R&D intensity on the sales growth by using OLS, quantile regressions, and GMM system estimators for a sample of 754 European firms for the 2003–2007 period. We also find this association is more intense in high-growth firms and is especially significant when referring to high-technology sectors. This paper gives empirical support to those recommendations from policy makers and business leaders for maintaining the R&D expenditures especially in high-technology sectors even when facing a recession.

► Positive effect of R&D intensity on sales growth in European firms. ► Investment in R&D makes a bigger contribution to the rates of growth of high-growth firms. ► The positive effect of R&D intensity on sales growth is notably significant in high-technology sectors.