Fact of the Week: Firms in Concentrated Industries Publish 3.5 Times More Research Than Firms in Competitive Industries

Luke Dascoli September 27, 2021
September 27, 2021

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Source: Arora et al., “The Rise of Scientific Research in Corporate America,” NBER: Working Paper Series, September 2021.

Commentary: Larger firms are often better positioned to shoulder the high costs of R&D given their ability to reap higher marginal returns from innovations. These firms emerge as scientific leaders that must rely on their own R&D to produce new knowledge that can lower the costs of future innovations. Their internal corporate research also helps to overcome institutional gaps in academic research. Recent NBER research confirms the relationship between firm size and commitment to corporate science, while also identifying a new statistically significant relationship between industry concentration and corporate science.

NBER economists analyzing data on corporate innovation from previous literature and data on publications from USPTO found that large firms—firms with above-average value of assets—publish scientific research more than 22 times as frequently as firms below the average. Beyond firm size, NBER reports that firms in non-competitive, concentrated industries publish 3.5 times more scientific research than firms in competitive industries. Firms of concentrated industries were also found to employ nearly double the number of laboratory personnel employed on average by competitive-industry firms.

As industries become more concentrated, they maintain greater ability to secure returns to the scientific research they produce, while avoiding the disincentive to R&D created by many free-riding competitors. Therefore, corporate growth, as well as consolidation, are beneficial to expanding the stock of available scientific knowledge and for spurring new innovations.