Determinants of Research and Development Activity by Electric Utilities

Ronald P. Wilder and Stanley R. Stansell

Bell Journal of Economics, 1974, vol. 5, issue 2, 646-650

Abstract: This paper develops a model of the determinants of R&D outlays of privately owned electric utilities and tests the model empirically with data for the years 1968 through 1970. The findings are that R&D outlays have an elasticity greater than one with respect to firm size, and are positively associated but relatively inelastic with respect to profitability. These results suggest that increasing firm size, either through merger or internal growth would have a favorable effect on R&D outlays. The results also imply that an increase in the regulated rate of return would not be an effective way to increase utility R&D outlays. There is no significant difference between the R&D behavior of utilities which do not fall under state regulation and those which are regulated.

Date: 1974
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