Abstract
The paper examines the factors influencing R&D in manufacturing companies. On using data on a large sample of public companies in India for 1987–2005, the findings indicate that increases in firm size are likely to be associated with increase in R&D up to a threshold. In terms of magnitudes, increase in size by ‘10 million raises the amount of R&D, on average, increase by ‘0.3 million. The evidence is also supportive of the fact that both the intensity of R&D as well as innovation activity is lower for leveraged firms. Finally, the findings fail to discern any significant improvement in R&D intensity in the post-reform period; although there is a noticeable decline in innovation activity after reforms. Privatisation does not seem to have exerted any perceptible influence on R&D behaviour of public firms.
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