4. Using firm level data of 54 businesses, you estimated a regression model to explain the determinants of firm growth. The dependent variable is the growth of sales revenue in percent. The SAS regression results are given below. Model: MODEL1 Dependent Variable: growth in sales (percent) Number of Observations Read 54 Number of Observations Used 54 Root MSE Dependent Mean Coeff Var Variable DF Intercept 1 size R&D 1 1 9.00829 R-Square 0.6443 7.58947 Adj R-Sq 0.6124 12.24128 Parameter Estimates Parameter Standard Estimate 4.3286 0.1198 1.2614 Error t Value Pr > |t| 2.7198 1.5915 0.1178 0.0576 2.0787 0.0428 0.7421 1.6997 0.0954 size-R&D 1 The independent variables are defined as follows: size: Firm's size measured as the number of full-time employees R&D: Dummy variable takes the value of 1 if the firm conducts research and development activities, 0 otherwise size-R&D: the product of firm's size and R&D dummy (a) Interpret the estimated coefficient of 'size'. 0.0752 0.0243 3.0973 0.0032 [6 marks] (b) At the 5% significance level, test the hypothesis that the model as a whole is significant. State your null and alternative hypothesis clearly. [8 marks] (c) At the 5% significance level, test the hypothesis that a firm conducting research and development activities achieves a higher growth of sales revenue than a similar- sized firm that does not conduct research and development activities. State your null and alternative hypothesis clearly. [5 marks] (Question continued in the next page) (d) What is the estimated effect of size on the growth rate of a firm that does not conduct research and development activities? [6 marks] (e) After presenting the regression results to your CEO, she instructed you to hire more employees to achieve a higher growth of sales revenue. How would you reply to this instruction? (f) [5 marks] Another researcher suggests that the variables 'size' and 'R&D' are likely to be highly correlated because large firms are more likely to conduct research and development activities. Identify the potential issue and discuss how it can be solved. [5 marks]