R&D activities and firms' characteristics: some evidence from North East England

Abstract

This study considers the impact of labour and product market characteristics on Research and Development (R&D) activity in the North East. This study extends the literature on regional R&D by focusing on potential strategic relationships between relative firm size, market structure and crucial labour market features. Primary data was collected from 620 North East firms to establish the characteristics of firms with respect to R&D, marketing activities (and by extension – product differentiation), labour markets and the likely impact of minimum wage legislation. The paper analyses the findings from a sample survey which yield typical profiling characteristics of small–medium enterprises (SME's) and large firms in the region. The findings cast new light on the debate surrounding firm size, market structure and R&D activity. A Probit analysis is utilised to establish the probability of a firm conducting R&D given the characteristics of large, medium and small firms. Generally, the evidence produced by the Probit study supports the Schumpeter–Galbraith thesis that relatively large firms with market power experience environmental success conclusive to R&D. The implications of the Probit study denote potential structural weaknesses in the North East economy in–so–far as few firms undertake any R&D at all. When R&D is undertaken, it is typically by large producers with market power experiencing benign labour markets.