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Estimating dynamic R&D choice: an analysis of costs and long-run benefits
journal contribution
posted on 2023-05-19, 13:17 authored by Peters, B, Roberts, MJ, Vuong, VA, Fryges, HThis 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.
History
Publication title
Rand Journal of EconomicsVolume
48Pagination
409-437ISSN
0741-6261Department/School
TSBEPublisher
RandPlace of publication
810 East 10Th St, Lawrence, USA, Ks, 66044Rights statement
Copyright 2017 The RAND CorporationRepository Status
- Restricted