Corporate R&D intensity decomposition: Different data, different results?

Abstract

Research and Development (R&D) indicators are used to facilitate international comparisons and as targets for research and innovation policy. An example of such an indicator is R&D intensity. The decomposition of the aggregate corporate R&D intensity is able to explain the differences in R&D intensity between countries by determining whether is the result of firms' underinvestment in R&D or of the differences across sectors. Despite its importance, the literature of corporate R&D intensity decomposition has been developed only recently. This article reviews for the first time the different methodological frameworks of corporate R&D intensity decomposition and how they are used in practice, shedding light on why sometimes empirical results seem to be contradictory. It inspects how the use of different data sources and analytical methods affect R&D intensity decomposition results, and what the analytical and policy implications are. The article also provides methodological and analytical guidance to analysts and policymakers.