O00 - Economic Development, Innovation, Technological Change, and GrowthReturn

The relationship between R&D expenditures and firm growth is examined for a cross-country firm-level dataset for the EU countries in the period from 1989 to 2019. A panel dynamic average treatment effect is estimated using a panel time-varying dynamic difference-in-differences model. The methodology can be counted as novel. The results show a positive and significant relationship between R&D and firm growth within the first five years of R&D investment in the 22 EU countries, over 700 firms and 30 years. The main novelty of the present study comes from examining the time-varying effect of R&D expenditures on firm growth for manufacturing firms in EU countries.