 Firms' R&D dilemma: to undertake or not to undertake R&DXulia González () and Consuelo Pazó () Applied Economics Letters, 2004, vol. 11, issue 1, 55-59 Abstract: It is well known that in most industries a significant proportion of firms do not perform innovative activities. Although empirical studies on the determinants of R&D often have taken this fact into account by considering the dependent variable as a censured one, there is not an explicit theoretical model to explain the zeros. The concern of this letter is to discuss a simple theoretical model where firms simultaneously decide whether to undertake or not R&D activities jointly with the level of the R&D investment. It is shown that a firm performs R&D activities only when its optimal level of R&D expenditure is higher than a threshold. Additionally, it is shown that both the probability of undertaking R&D activities and the R&D expenditure increase with market power, with the elasticity of demand with respect to quality and with the elasticity of quality with respect to R&D. Finally, from this simple theoretical framework we discuss a suitable econometric model that threats these decisions simultaneously. Date: 2004 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:11:y:2004:i:1:p:55-59 Ordering information: This journal article can be ordered from DOI: 10.1080/1350485042000187471 Access Statistics for this article Applied Economics Letters is currently edited by Anita Phillips More articles in Applied Economics Letters from Taylor & Francis Journals |
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