Technological progress is an important goal of
the U.S. economy. Progressiveness covers a wide area encompassing
R&D activity, invention and innovation. The following section,
based upon a study by Professor Edwin Mansfield, presents current
knowledge concerning the relationship between firm size and
invention, innovation, and diffusion of new ideas in the petroleum
and bituminous coal industries. In addition, implications
concerning merger and divestiture policy are discussed.
Firm
Size and R&D Activity
Petroleum Refining. In absolute terms, the
petroleum industry is among the largest spenders in research and
development; in 1971, total R&D outlays were about $500
million, a figure which includes $128 million for chemical R&D
conducted by oil companies.
The
relationship between firm size and R&D expenditures is
important. It is generally accepted that some minimum size is
necessary if a firm is going to be able to support R&D
activity; but the more important question is whether very large
size yields proportionately greater R&D expenditures. Research
results, based on nine major petroleum firms for the 1945-1959
period, indicate that, among the top firms, a one percent increase
in firm sales yields an 0.86 percent increase in R&D
expenditures. Others have reported similar results. Thus, a firm's
R&D intensity, in terms of R&D expenditures per unit of
sales, does not appear to increase in proportion to increased size,
once the threshold size is exceeded.
It is
important to note that the R&D projects carried out by large
petroleum firms tend to be generally safe from a technical view,
have a high probability of success, and are expected to influence
profits in five years or less. Only a small proportion of the
outlays represent basic research. Enos presents evidence that
laboratories operated by the leading oil firms were not responsible
for the radical inventions discovered prior to World War II. Such
ideas as continuous processing, catalysis, and cracking by the
application of heat and pressure are attributable to independent
inventors. There is however some