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To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.respol.2009.12.008 Byline: Chang-Yang Lee Keywords: Firm growth; Technological competence; Learning-by-doing in R&D; Knowledge threshold Abstract: This paper focuses on the dual role of R&D - knowledge generation and the technological-competence-enhancing effect of R&D - and its implication for the endogenous evolution of R&D productivity and the pattern of firm growth. In particular, based on the evolution of firm-specific R&D productivity or technological competence, this paper derives a simple R&D-based model of firm growth capable of explaining various aspects of firm growth. The model proposes three prototype patterns of firm growth, depending on both firm- and industry-specific characteristics. The former includes firm-specific technological-competence-enhancing capability and the initial level of technological knowledge, and the latter includes industry-specific R&D appropriability. Specifically, firms with low technological-competence-enhancing capability tend to follow a convergent growth pattern in which firm growth gradually declines, while firms with high technological-competence-enhancing capability tend to exhibit either a sustained or a vicious growth pattern depending on the initial size of their technological knowledge stock. An empirical analysis of unique data on firm growth and technological capability provides supportive evidence for the role of technological-competence-enhancing capability in conditioning the pattern of firm growth. Author Affiliation: KAIST Business School, KAIST (Korea Advanced Institute of Science and Technology), 87 Hoegiro, Dongdaemun, Seoul 130-722, Republic of Korea Article History: Received 14 May 2008; Revised 28 November 2009; Accepted 14 December 2009 Article Note: (footnote) [star] The author thanks Professors Steven Klepper and Frederic M. Scherer and the participants at the Faculty Seminar at KAIST Business School for their valuable comments on the early version of the paper. The author also thanks Editor Ben Martin and two anonymous referees for their encouragement and invaluable comments on a previous version of this paper.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.respol.2009.04.004 Byline: Chang-Yang Lee Keywords: R&D intensity; Cluster; Geographical proximity; Localized knowledge spillovers; Natural excludability Abstract: This study aims to evaluate whether firms located in clusters invest more intensively in research and development (R&D) than their non-clustered counterparts. Specifically, it proposes a model of firm R&D and tests empirically its implications for the effect of being located in a cluster on firm R&D intensity. The key ideas underlying the theory are as follows: (1) due either to natural excludability or to a high degree of stickiness of R&D-opportunity-bearing technological knowledge, geographical proximity per se is limited in the (automatic) spillover of knowledge with promising R&D opportunities to nearby firms; (2) geographical proximity may, however, help enhance the effectiveness or efficiency of knowledge exchange through market mechanisms (e.g., through contract R&D, R&D collaboration); (3) potential advantages (or disadvantages) in firm R&D of being located in a cluster also depend on the degree of asymmetry in technological competence among firms located in the cluster. The key ideas are supported by an empirical analysis of a multi-industry, multi-country data set compiled by the World Bank. In particular, the results show that being located in a cluster per se actually has a negative effect on firm R&D intensity, which is in contrast to the conventional wisdom of pure or automatic localized knowledge spillovers, as far as firm R&D intensity is concerned. Author Affiliation: KAIST Business School, KAIST (Korea Advanced Institute of Science and Technology), 207-43 Cheongryangri, Dongdaemun, Seoul 130-722, Republic of Korea Article History: Received 30 June 2008; Revised 30 March 2009; Accepted 2 April 2009

The Schumpeterian hypothesis, which analyzes the factors that influence the relationship between firm size and R&D expenditure is discussed.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.respol.2005.04.006 Byline: Chang-Yang Lee, Taeyoon Sung Keywords: Technological competence; Proportionality; Absorptive capacity Abstract: This paper shows that firm heterogeneity in technological competence, rather than differences in industry-specific characteristics, is the primary condition determining the long-debated relationship between firm size and R&D. Specifically, by utilizing a formal model of firm R&D that shows that profit-maximizing firm R&D intensity is determined jointly by firm-specific technological competence and consumer preference regarding quality and price, this paper suggests that firm size affects firm R&D intensity not directly, but through its influence on firm-specific technological competence. In particular, four predictions are drawn and tested empirically: (1) in general, the size-R&D relationship is less-than-proportional or inverted U-shaped, especially for low-technological-competence firms; (2) however, the common less-than-proportional relationship disappears, and a more-than-proportional relationship becomes increasingly likely, for firms with high levels of technological competence, plausibly due to competence-enhancing, learning economies of scale and/or scope in R&D; (3) firms with larger accumulated R&D experience are, ceteris paribus, less likely to exhibit the common less-than-proportional relationship; (4) among industries, a greater within-industry departure from the proportional size-R&D relationship is expected for industries with seemingly high, rapidly changing technological-opportunity conditions. These predictions, especially pertaining to the conditioning role of technological competence in the size-R&D relationship, are empirically supported by the unique data by the World Bank. Author Affiliation: Graduate School of Management, Korea Advanced Institute of Science and Technology (KAIST), 207-43 Cheongryangri, Dongdaemun, Seoul 130-722, South Korea Article History: Received 23 March 2004; Revised 21 April 2005; Accepted 26 April 2005