The relationship between R&D concentration and industry R&D intensity: a simple model and some evidence

This study aims to demonstrate that the concentration (or distribution) of firm R&D intensities within an industry is closely related to the overall R&D intensity of the industry. Unlike the well-studied relationship between sales concentration, or market structure, and industry R&D intensity, the relationship between the concentration of R&D in an industry and its overall R&D intensity has not been explored before. We present a simple model of industry R&D intensity, in which R&D concentration, R&D appropriability, and industry-wide technological opportunities jointly determine industry R&D intensity. In particular, we show that, all else being equal, the more skewed the distribution of firm R&D intensities, the higher the level of industry R&D intensity. We use a six-year panel dataset on the R&D intensities, R&D appropriability, and technological opportunities of four-digit SIC Korean manufacturing industries during the period 1991-1996.