R&D and Software Firms’ Productivity and Efficiency: Empirical Evidence of Global Top R&D Spending Firms

The main objective of this study is to investigate the impact of corporate research and development (R&D) activities on firm performance. To this end, the stochastic frontier technique is used on a unique balanced longitudinal dataset comparing top global software enterprises over the period 2005-2010. The software companies is divided into system software companies, application software companies and service software companies according to the types of product or service of software companies. In this framework, this study analyzes the effect of R&D, capital and employment on sales, and quantifies technical inefficiency of individual firms. The results of this study suggest that there are two ways in which R&D can influence the system software enterprise, one is to promote the frontier production function boundary forward, namely, to complete technological progress to improve the productivity of enterprise; another one is to improve the technical efficiency of enterprise and reduce waste. With respect to the application software enterprises, R&D can only improve productivity through technological progress; the effect of R&D on software service companies is not significant.