The stock market's valuationof R&D externalities
Hironobu Miyazaki and
Hiroyuki Aman
Applied Financial Economics Letters, 2008, vol. 4, issue 5, 369-373
Abstract:
R&D, particularly basic research, is generally considered as a public good. It provides positive externalities to other firms. This article investigates rival firms' stock-price responses to an increase in the R&D expenditures of a firm. Examining firms in the pharmaceutical industry, we found that the market valuations of some rival firms benefit from R&D externalities. Moreover, the cross-sectional analysis indicated that R&D-intensive firms benefit immensely from them. From this result, investors might assess that these firms have the full potential to absorb new R&D knowledge.
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:taf:raflxx:v:4:y:2008:i:5:p:369-373
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DOI: 10.1080/17446540701720667
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