IMPACT OF RESEARCH AND DEVELOPMENT INVESTMENTS ON Firm's PERFORMANCE

ABSTRACT This study examined the impact of innovative efforts, measured by investment in Research and Development, on sales growth, taking into account different "degrees of proximity" to the frontier. To test the hypothesis, we built a regression model with multilevel data to assess financial data of 1,500 firms from year 2012. We estimated the Total Factor Productivity of each firm and built an index of proximity to the frontier (firm with higher productivity). The results show that firms closer to the frontier employ R&D resources more efficiently, as their growth estimates are higher than those of firms situated further behind the frontier.