The production function of top R&D investors: Accounting for size and sector heterogeneity with quantile estimations

This paper aims at showing how quantile estimations can make the analysis of the firm’s productionfunction better able to deal with the innovation implications of production. In order to do this, we provideevidence of how top world R&D investors differ in the production impact of their inputs and in theirrate of technical change. We use the EU Industrial R&D Investment Scoreboard and carry out a quantileestimation of an augmented Cobb–Douglas production function for a panel of more than 1000 companies,covering the 2002–2010 period. The results of the pooled sample are contrasted with those obtained fromthe estimates for different groups of economic sectors. Returns to scale are bounded by the size of thefirm, but to an extent that decreases with the technological intensity of the sector. The output return of knowledge capital is the largest, irrespective of firm size, but in high-tech sectors only. Elsewhere, physicalcapital is the pivotal factor, although with size variations. The investigated firms also appear differentin their technical progress: embodied in mid-high and low/mid-low tech sectors, and disembodied inhigh-tech sectors.