Impact of R&D Activities on Pricing Behaviors with Product Turnover

Résumé En

This study empirically investigates the impact of research and development (R&D) activity on product turnover from Point-of-Sales (POS) data. When measuring the inflation rate in an economy, the effects of quantitative changes, volume changes, and quality changes from nominal sales changes must be removed. In order to examine the effect of R&D activities on price changes from sales data, we implement an empirical combining three datasets: weekly POS data, patent database (IIP Patent DB) data, and Survey of Research and Development data. We use regression analysis with pooling and panel regression. We observe that while the effect of price increases due to the new product introduction can be related to R&D behavior a negative effect on the price of the incumbent product is also observed. In addition, the relative prices of new and incumbent products tended to be higher for companies with active R&D expenditures. We suggest that continuous R&D is necessary to keep introducing high value products while prices are under pressure.