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The Market Value of R&D in Emerging Economies: Evidence from India

Sunil Kanwar and Bronwyn Hall

The B.E. Journal of Economic Analysis & Policy, 2017, vol. 17, issue 1, 22

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 such as the United States and European countries, suggesting some degree of underinvestment. 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 (about 10 %). We also find that the market value–R&D relationship does not vary significantly across industry groups, although these results are rather imprecise.

Keywords: market value; R&D; manufacturing firms (search for similar items in EconPapers)
JEL-codes: O34 O32 L60 (search for similar items in EconPapers)
Date: 2017
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