Abstract:
FISHER and TEMIN (1973) have argued
recently that many empirical studies1 relating
to the Schumpeterian hypothesis are inappropriate
for testing that hypothesis. They
observe that Schumpeter can be interpreted as
hypothesizing that the elasticity of the value of
research and development (R and D) output
with respect to firm size is greater than unity.
On the other hand, the empirical studies have
been concerned with investigating the elasticity
of R and D inputs with respect to firm size.
Fisher and Temin demonstrate that a finding
that the R and D input elasticity exceeds unity
does not imply that the R and D output elasticity
exceeds unity also. Given that public
policy formulation should be based on tests of
the Schumpeter hypothesis rather than on tests
of the R and D input elasticity, their point is
well taken. Of course, in defense of the empirical
studies, it can be argued that data limitations
have restricted testing to the R and D
input elasticity, and that most of the researchers
have been aware that they were not testing the
Schumpeter hypothesis.............
