Corporate Restructuring and R&D: A Panel Data Analysis for the Chemical Industry

Ashish Arora Heinz School of Public Policy Carnegie Mellon University Marco Ceccagnoli Heinz School of Public Policy Carnegie Mellon University Marco Da Rin Dipartimento ‘G. Prato’(Università di Torino) and IGIER

September 2000

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Financial support from the European Commission for the project `From Science to Products: A green Paper on Innovation in the Chemical Industry' (SOE1-CT97-1059) is gratefully acknowledged. We thank other participants in the project for useful comments. Address correspondence to: Ashish Arora or Marco Ceccagnoli, Heinz School of Public Policy, Carnegie Mellon University, Pittsburgh (PA)., 5000 Forbes Ave, Pittsburgh PA 15213-3890, ashish@andrew.cmu.edu, marcoc@andrew.cmu.edu, or to Marco Da Rin, IGIER, via Salasco 5, 20136 Milano (Italy). Phone (39-02) 5836.3379, Fax (39-02) 5836.3302, E-mail: marco.darin@uni-bocconi.it.

Abstract
We contribute a novel approach to the existing literature on the effects of restructuring on R&D investment by focussing on a single industry, chemicals. The chemical industry is very research intensive and has experienced thorough restructuring since the early 1980s. By focussing on a single industry we are able to identify the technological and R&D features of its segments. This is important, since there is evidence that restructuring affects R&D differently in businesses with different technological features. However, no study so far has provided a systematic inquiry into this link. Using a panel of 535 European, American, and Japanese firms for the years 1987-1997 we find restructuring to be an important component in the observed changes in R&D intensity. We show that restructuring affects R&D both through changes in size and through changes in the composition of business portfolios, and that these effects differ across industry segments.

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