hero working papers

Corporate Restructuring and R&D: A Panel Data Analysis for the Chemical Industry

Number: 173
Year: 2000
Author(s): Ashish Arora (Heinz School of Public Policy, Carnegie Mellon University), Marco Ceccagnoli (Heinz School of Public Policy, Carnegie Mellon University) and Marco Da Rin (Università di Torino and IGIER)

We contribute a novel approach to the existing literature on the effects of restructuring on R&D investment by focussing on a single industry, chemicals. The chemical industry is very research intensive and has experienced thorough restructuring since the early 1980s. By focussing on a single industry we are able to identify the technological and R&D features of its segments. This is important, since there is evidence that restructuring affects R&D differently in businesses with different technological features. However, no study so far has provided a systematic inquiry into this link. Using a panel of 535 European, American, and Japanese firms for the years 1987-1997 we find restructuring to be an important component in the observed changes in R&D intensity. We show that restructuring affects R&D both through changes in size and through changes in the composition of business portfolios, and that these effects differ across industry segments.