Determinants of Firms R&D Intensity: Panel Data Approach (2SLS Method)

Research and development (R&D) as one of the inputs of innovation can increase firm's productivity through improving product quality or reducing average cost of production, and can have a positive effect on firm's profitability. So, the country's economic success, is that manufacturing firms that are innovative and produce goods that have the power to compete with similar foreign goods. Therefore, the aim of this study is to answer the question of what factors determine the firm's investment in research and development. For this purpose, both developed and developing countries have been selected to investigate determinants of their business enterprise research and development (BERD based on panel data approach using the 2SLS (two-stage least squares) method during the period 1995-2012. In this study, endogeneity of intellectual property rights are considered. Estimation results indicate a positive and significant effect of intellectual property rights, and university R&D intensity on business enterprise research and development (BERD) intensity. Access to internal funds variable has positive effect that is measured with domestic savings to GDP ratio with one period lag, which is significant only in developed countries. Also, the exports of high-tech variable has positive effect and significant for both groups of countries.