Understanding Innovative Investment: Intangible Investment and R&D Expenditures of Korean Firms

초록

This study examines firms’ propensity for innovative investment, such as intangible investment and R&D expenditures, by using rich panel data of Korean firms from the Survey of Business Activities. This topic has not been documented as much as the contribution of innovative investment to economic performance. The dynamic random effects probit estimations show not only that firms’ propensity for intangible investment is persistent and dependent on firms’ characteristics, but also that the dependence on firms’ factors varies across sectors. On the one hand, estimations show that the propensity for intangible investment is complementary with internal R&D expenditures, except among ICT manufacturing firms. Among intellectual property rights, patents (trademarks) are positively associated with intangible investment in the non-ICT manufacturing (service) sector. In general, firms’ affiliation with a parent company, or their status as listing companies, affects firms’ propensity for intangible investment positively. On the other hand, firms’ propensity for R&D expenditures exhibits stronger persistence than that for intangible investment. Non-ICT manufacturing firms exhibit the strongest persistence of R&D expenditures. While intangible investment is associated positively with propensity for R&D, patent rights are the only intellectual property rights showing positive connection to R&D expenditures. This effect is clearest among ICT manufacturing firms. In conclusion, this study contributes toward a better understanding of Korean firms’ innovative investment by highlighting the role of firm-level characteristics, but also by demonstrating the heterogeneity of factors across sectors.

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