EU Science Hub

The impact of private R&D on the performance of food-processing firms: Evidence from Europe, Japan and North America

Abstract: 
This report investigates the impact of corporate research and development (R&D) on firm performance in the food-processing industry. The agro-food industry is usually considered to be a low-tech sector (the share of total output that is attributable to R&D is around 0.27% in the EU). However, the agro-food industry is very heterogeneous. On the one hand, there are many highly innovative food-processing firms with intensive R&D activity and, on the other hand, many food-processing firms derive and adopt innovations from other sectors such as machinery, packaging and other manufacturing suppliers. We perform data envelopment analysis (DEA) with two-step bootstrapping, which allows us to correct the bias in (in)efficiency and generate unbiased estimates for (in)efficiencies. We use a corporate dataset of 307 companies from agriculture and food-processing industries from the EU, the USA, Canada and Japan for the period 1991–2009. The estimates suggest that R&D has a positive effect on firms’ performance, with marginal gains decreasing at the R&D level, and performance differences detected across regions and food sectors. General public expenditure in R&D is also associated with a positive impact on firm performance. As a result, policy support for this type of non-high-tech innovative sector is expected to generate growth. However, results that suggest heterogeneity in R&D effects across EU Member States may point to differences in the implications of innovation policies across EU regions.
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