Research & development and firm size

Abstract

For some decades now, the relationship between innovative activity and firm size has been the object of a fairly extensive research. Motivations underlying such a study include the necessity to assess the contribution of industrial unit size to technical advance, and the related aspect of the search for an optimal industrial structure in terms of innovative efficiency. Amidst the debate on this field of study, and the controversy raised by conclusions which have not reached a consensus, is the so called Schumpeter hypothesis, stating that the large scale establishment "...has come to be the most powerful engine of [economic] progress..." (Schumpeter, 1942, p.106). Here, another contribution to the debate is made, extending the empirical research to a particular country, namely Portugal, and to a particular industrial sector within it, namely the electronic/electrical industrial sector, and testing analytically the validity of the Schumpeter hypothesis on the relationship between size and inventive activity. Based in the results reported here, obtained through a postal survey addressed to a sample of firms, based on comparative analysis of similar recent research work, and on theories of economics and technical change, it is argued that the understanding of the relationship between firm size and innovativeness will be greatly enhanced if a dynamic perspective on the subject is adopted. There are several indications and evidences leading us to conclude that this relationship is not constant or static but evolves with time, and what causes it to change is strongly related to qualitative advances in science and technology.