External and Internal R&D, Capital Investment and Business Performance in the Spanish Agri-Food Industry

We examine the effects of external and internal expenditure on research and development on the business performance of industrial agri-food enterprises. For this purpose, a data sample from the Encuesta de Estrategias Empresariales en Espana (Survey of Business Strategies in Spain) was used, which includes information on more than 400 businesses over the period 2000-2008. The econometric analysis uses quantile regressions to address the vast asymmetry of the variables and to identify non-linear relationships. The results reveal interesting new findings on the impacts of R&D on the agri-food industry. The most evident, although not the most immediately apparent, relationship concerns the positive effects of external R&D on business performance. Internal R&D was also revealed to be an important way of enhancing the productivity of SMEs. In addition, the modernisation of the production process through investment in capital goods continues to be the main path to improve competitiveness. However, support was found neither for the inverse relationship, that is the most profitable firms are those that spend the most on R&D, nor for complementarity between external and internal R&D. The latter would imply that the bulk of Spanish agri-food firms have at most the capacity for only one type of R&D.