Research and development, profits, and firm value: A structural estimation

Missaka Warusawitharana

Quantitative Economics, 2015, vol. 6, issue 2, 531-565

Abstract: This study presents a model in which firms invest in research and development (R&D) to generate innovations that increase their underlying profitability and invest in physical capital to produce output. Estimating the model using a method of moments approach reveals that R&D expenditures contribute significantly to profits and firm value. The model also captures variation in R&D intensity, profits, and firm value across R&D‐intensive industries. Counterfactual experiments suggest that changes in the distribution of firms in the economy may, over the long run, mitigate tax policy changes designed to encourage R&D expenditures.

Date: 2015
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Working Paper: Research and development, profits and firm value: a structural estimation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:quante:v:6:y:2015:i:2:p:531-565

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