Research and Development, Innovation, Training, Quality and Profitability: Evidence from France

Abstract

This paper simultaneously explores the firm-level relationships between R&D investments, innovation, training investments, quality and firm performance. It offers empirical evidence on how innovation, training and quality affect firm profitability. One new feature we introduce is the link between training and quality. Using asymptotic least square, we estimate a five-equation model including censored, dichotomous and linear variables with a specific circular scheme. The data are from the French innovation survey combined with firm-level register data. This allows us to consider a number of training and quality related variables which are usually neglected in the literature. While traditional determinants are controlled for, our results show there exists a virtuous circle. Our results are also in line with a number of stylized facts.

Keywords: R&D, innovation, training, quality, profitability, limited dependent

JEL Classification: C31, C34, L60, O31, O33