THE MARKET VALUATION OF INNOVATION-THE CASE OF INDIAN MANUFACTURING

Sunil Kanwar and Bronwyn Hall

No 237, Working papers from Centre for Development Economics, Delhi School of Economics

Abstract: We revisit the relationship between market value and innovation in the context of manufacturing firms in a developing country, using data for Indian firms from 2001 through 2010. Surprisingly, we find that financial markets value the R&D investment of Indian firms the same or higher than it values such investment in developed economies like the US. The paper explores the use of a proxy for the option value of R&D and finds that this can account for a very small part of the R&D valuation (5 per cent at most). We also find that the market value-R&D relationship does not vary significantly across industry groups, although these results are rather imprecise.

Pages: 36 pages
Date: 2014-05
New Economics Papers: this item is included in nep-cse, nep-ino and nep-tid
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Related works:
Working Paper: The Market Valuation of Innovation: The Case of Indian Manufacturing (2014)
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