 R&D and Market Value: Appropriability vs. PreemptionSadao Nagaoka and 貞男 長岡 No 04-03, IIR Working Paper from Institute of Innovation Research, Hitotsubashi University Abstract: The recent empirical studies on innovation and market value suggest that R&D has a strong complementarity with market share in the market valuation of firms. Blundell, Griffith and Reenen (1999) argue that it represents the strategic preemptive effect, while Hall and Vopel (1997) suggest a Schumpeterian reason (the cost of financing R&D is lower for large firms). The theoretical framework of these studies is the classical work by Griliches (1981), which postulates that the market value of firm is given by the sum of the values of physical capital and R&D capital with respective multipliers. However, non-rivalry in using new knowledge within a firm makes this framework highly questionable. This paper examines the nexus between R&D and market value, based on a simple but new structural model. Major findings are the following. First, the new model shows that the market evaluation of R&D may well be high for a firm with a large market share, simply due to its appropriability advantage. Second, our estimation based on the data of the Japanese firms shows that the new specification performs better. Third, it shows that there is no statistical support for the prevalence of preemption effect. Keywords: R&D; market value; appropriability; preemption (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hit:iirwps:04-03 Access Statistics for this paper More papers in IIR Working Paper from Institute of Innovation Research, Hitotsubashi University Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.