Impact of Research and Development Expenditures on Firm Level Innovation: Evidence from Developing Nations

Abstract

Developing countries are lagging behind in terms of research and development expenditure and innovation activities. The ability to innovate depends upon the worker's knowledge, skills, training, and experience. It is widely believed that innovation drives growth and plays a vital role in firm survival. The study's objective was to investigate the effect of a firm's research and development expenditures on innovation activities in less developing nations using World Enterprise Survey data. The study utilized the multilevel logistic regression model. The innovation is measured through the survey question, “During the last three years, has this establishment introduced new or significantly improved products or services”. The results of the logistic regression model indicate that research and development expenditures has a positive impact on innovation. The all of other control variables such as registered firm, firm size, firm age and skilled worker also positively affected by research and development expenditures.