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Estimating dynamic R&D choice: an analysis of costs and long-run benefits


Peters, B and Roberts, MJ and Vuong, VA and Fryges, H, Estimating dynamic R&D choice: an analysis of costs and long-run benefits, Rand Journal of Economics, 48, (2) pp. 409-437. ISSN 0741-6261 (2017) [Refereed Article]

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Copyright 2017 The RAND Corporation

DOI: doi:10.1111/1756-2171.12181


This article estimates a dynamic structural model of discrete Research and Development (R&D)investment and quantifies its cost and long-run benefit for German manufacturing firms. The model incorporates linkages between R&D choice, product and process innovations, and future productivity and profits. The long-run payoff to R&D is the proportional difference in expected firm value generated by the investment. It increases firm value by 6.7% for the median firm in high-tech industries but only 2.8% in low-tech industries. Simulations show that reductions in maintenance costs of innovation significantly raise investment rates and productivity, whereas reductions in startup costs have little effect.

Item Details

Item Type:Refereed Article
Keywords:productivity, innovation, industry
Research Division:Economics
Research Group:Applied economics
Research Field:Industry economics and industrial organisation
Objective Division:Economic Framework
Objective Group:Microeconomics
Objective Field:Microeconomics not elsewhere classified
UTAS Author:Fryges, H (Dr Helmut Fryges)
ID Code:122281
Year Published:2017
Web of Science® Times Cited:20
Deposited By:TSBE
Deposited On:2017-11-08
Last Modified:2018-05-24

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