Manufacturing and Service sector R&D : Significantly different

Sammanfattning: The purpose of this thesis is to investigate differences in the R&D motivations for manufacturing and service firms. The thesis contributes to existing R&D literature as it proposes a novel approach for the categorization of manufacturing and service firms. Using data from the Statistics Sweden R&D survey, the paper classifies firms according to their income structure, which allows the study to base industry classifications to what best aligns with firms’ actual activities. The methodology consists of Welch’s two- sample t-test in combination with OLS regressions to examine differences in the motivations for manufacturing and service firms. The results suggest that there is a statistically significant difference in the motivations. Manufacturing firms are found to devote a higher proportion of their total R&D investments towards the improvement of existing products. Services were found to devote a greater share of their R&D investments to the development of new processes and to increases in general knowledge-building. Moreover, the study finds a substantial disparity in how firms are classified according to industry classification codes and how they actually earn their revenues and therefore questions the accuracy of conventional industry classification methods.