R&D, Investment, and Industry Dynamics

Saul Lach and Rafael Rob
Authors registered in the RePEc Author Service: Rafael Robb

Journal of Economics & Management Strategy, 1996, vol. 5, issue 2, 217-249

Abstract: We present a model of industry evolution where the dynamics are driven by a process of endogenous innovations followed by subsequent embodiments in physical capital. Traditionally, the only distinction between R&D and physical investment was one of labeling: the first process accumulates an intangible stock, knowledge, while the second accumulates physical capital. Both stocks affect output in a symmetric fashion. We argue that the story is not that simple, and that there is more to it than differences in the object of accumulation. Our model stresses the causal relationship between past R&D expenditures and current investments in machinery and equipment. This causality pattern, which is supported by the data, also explains the observed higher volatility of physical investment relative to that of R&D expenditures.

Date: 1996
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Citations: View citations in EconPapers (24)

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https://doi.org/10.1111/j.1430-9134.1996.00217.x

Related works:
Working Paper: R&D, investment and industry dynamics (1995)
Working Paper: R&D, Investment and Industry Dynamics (1992)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:5:y:1996:i:2:p:217-249

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