R&D, IP, and firm profits in the automotive supplier industry

Stefan Lutz

No 2013-15, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: Economic theory implies that research and development (R&D) efforts increase firm productivity and ultimately profits. In particular, R&D expenses lead to the development of intellectual property (IP) and IP commands a return that increases overall profits of the firm. This hypothesis is investigated for the North American automotive supplier industry by analyzing a panel of 5000 firms for the years 1950 to 2011. Results indicate that R&D expenses in fact increase profitability at the firm level. In particular, increases in the R&D expense to sales ratio lead to increases in the profit contribution of intangible assets relative to sales. This indicates that more R&D intensive IP should command higher royalty rates per sales when licensed to third parties and within multinational enterprises alike.

Keywords: Evaluating forecasts; Macroeconomic forecasting; Rationality; Intuition; Weak-form efficiency; Fixed-event forecasts. (search for similar items in EconPapers)
JEL-codes: D24 L20 L62 M21 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2013
New Economics Papers: this item is included in nep-ino
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Working Paper: R&D, IP, and firm profits in the automotive supplier industry (2013)
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