Estimating Dynamic R&D Demand: An Analysis of Costs and Long-Run Benefits

Bettina Peters (), Mark Roberts, Vuong Van Anh and Helmut Fryges

No 19374, NBER Working Papers from National Bureau of Economic Research, Inc

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

JEL-codes: L60 O30 O33 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-ino and nep-tid
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Published as "Estimating Dynamic RD Demand: An Analysis of Costs and Long-Run Benefits", with Bettina Peters, Van Anh Vuong, and Helmut Fryges, Rand Journal of Economics, Vol. 48, No. 2 (Summer 2017), pp. 409-437

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