Industry Investment in Basic Research Assuming Interdependence of Benefits from Appropriable and Inappropriable Activities

Prafulla Joglekar
Additional contact information
Prafulla Joglekar: La Salle University, Philadelphia, Pennsylvania 19141

Management Science, 1990, vol. 36, issue 2, 224-239

Abstract: Using a model of the resource allocation behavior of a group of firms, Joglekar and Hamburg (1983) demonstrate that unaided industry allocation to basic research is suboptimal and that in stimulating this allocation, provision of government seed money is generally counterproductive, while the provision of matching subsidies is not cost-efficient. Using basically the same model, but focusing on the case of a homogeneous industry, Joglekar and Hamburg (1986) further identify several industry characteristics that increase the degree of suboptimality of investment in basic research, and consequently, the need for government intervention. Joglekar and Hamburg (1983), (1986) assume that a firm's benefits from its investment in appropriable activities are independent of its benefits from the industry's total investment in the pertinent basic (i.e., inappropriable) research. Investment theory suggests that a firm's benefits often depend upon its investment portfolio and that an investment in basic research that is not supported by suitable investments in other activities (e.g., plant and equipment, personnel training, etc.) may yield far smaller benefits than could be potentially obtained. Therefore, in this paper, I present a model that assumes such an interdependence of benefits. I find that most of Joglekar and Hamburg's (1983), (1986) conclusions are confirmed by the new model.

Keywords: individually rational industry allocation; underinvestment; government policy; robust conclusions (search for similar items in EconPapers)
Date: 1990
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.36.2.224 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:36:y:1990:i:2:p:224-239

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().