R&D and Patents: Analysis of Manufacturing Firms in South Korea

This study explores the impact of internal and external research and development (R&D) investment spillovers on patents using a firm-level panel dataset of South Korean manufacturing industries. The zero-inflated negative binomial analysis empirically shows that domestic and foreign firms’ internal R&D investment generates positive intra-industry spillover effects on patents. Considering firms’ heterogeneous absorptive capacity, which depends on their ownership structure, foreign firms tend to capture more positive spillovers from intra-industry R&D investment compared to domestic firms. This suggests that foreign firms can utilize external knowledge more effectively. However, this positive effect exists in medium- and low-technology industries but not in high-technology industries. Therefore, these empirical results imply that the heterogeneous spillover effects from firms’ R&D choices and industrial technology level should be considered for implementing effective R&D policies.