NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Lia Sheer

Fuqua School of Business, Duke University
100 Fuqua Drive
Durham NC 27708

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NBER Working Papers and Publications

February 2017Back to Basics: Why do Firms Invest in Research?
with Ashish Arora, Sharon Belenzon: w23187
If scientific knowledge is a public good, why do firms invest in research? This paper revisits this classic question with new data on patent citations to scientific publications by corporations. Using data on 4,736 firms for the period 1980-2006, we document that corporate investment in research is closely related to its use in internal invention. Specifically, firms that build on their scientific research in their inventive activity invest more in research than those that are less successful in using their research internally. Consistent with this, research that is internally used is valued more and is more productive. Our results are consistent with the view that to justify further investment in research corporate scientists need to demonstrate that their recent scientific work is useful...
 
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