Business Expenditures on Research and Developlment as a Part of the Innovation Capacity in Terms of Competing Industries

Abstract

Purpose of the article: This paper examines how firms ‘internal factors and their industrial affiliation influence the amount of business expenditures on research and development. Methodology/methods: The means for expressing that relation is the hierarchical linear model, in which the fixed explanatory variables are quantitative business indicators that include the number of employees, operational profit and capital expenditures. The qualitative explanatory factor is the industry, in which the firm operates. Scientific aim: The paper sees business expenditures on research and development as one of the factors that determine the firms innovative performance, which in turn may contribute to the growth of the country’s innovative capacity. Data of 1410 firms were used, classified into groups according to their country of operation. The industrial factor of investment in research and development is also examined. Findings: The results show, that there exists a strong influence of expenditures on research and development, while the influence of the number of employees is not statistically significant. Conclusions: The findings also suggest that although some industries, such as manufacturing or production and distribution of electricity, were expected to have high expenditures on research and development, in fact, they are lower than the average. According to EU Industrial R&D Investment Scoreboard, the best innovative performance is shown by the pharmaceutical sectors, which is the top R&D investor, too. The paper shows, that the highest expenditures on research and development are realized by software sector, pharmaceutical sector, telecommunications equipment, biotechnology and semiconductors. On the other hand, the lowest expenditures are in automobile and parts and technology hardware and equipment sectors.