Corporate Skills as an Ex-Ante Incentive to R&D Investment

Using a balanced panel of 215 Italian manufacturing firms over the 1995-2000 period, this paper investigates the determinants of R&D investment at the level of the firm. While finding further support for the well-established technology-push and demand-pull hypotheses, this study also tests the role of skill endowment in increasing a firm’s R&D investment. Consistently with the related managerial and economic literature, our basic result is that current skill endowment may significantly and positively influence a firm’s current R&D decision. These microeconometric results have been obtained using a Least Squares Dummy Variable Corrected (LSDVC) estimator, a recently-proposed panel data technique particularly suitable for small samples.