ABSTRACT
This chapter examines the relationship between the size of a firm and the scale of its research and development activities. It looks at how research and development expenditures by firms are determined and the problems posed by the relatively high risk and uncertainty encountered in these activities. The chapter also looks at the part played by research and development in furthering the growth of firms. Growth by diversification can occur either through the development of new products or through entering existing markets which the firm had previously ignored. Research and development are concentrated in a few industries, and companies in these industries undertake these activities in order to further their objectives, notably the desire for expansion. In the mechanical and electrical engineering industries, and in vehicles, however, the opposite pattern is shown. The chapter also looks at the influence of market structure on the scale of firms' research and development expenditures.
