The Market Value of R&D in Weak Innovation Regimes: Evidence from India

Sunil Kanwar and Bronwyn Hall

No 21196, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We revisit the relationship between market value and innovation in the context of manufacturing firms in a developing country, using data for Indian firms from 2001 through 2010. Surprisingly, we find that financial markets value the R&D investment of Indian firms the same or higher than it values such investment in developed economies such as the US and European countries, suggesting some degree of underinvestment. The paper explores the use of a proxy for the option value of R&D and finds that this can account for a very small part of the R&D valuation (about 10 per cent). We also find that the market value‐R&D relationship does not vary significantly across industry groups, although these results are rather imprecise.

JEL-codes: G12 O16 O30 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-cfn, nep-com, nep-cse, nep-ino, nep-knm and nep-tid
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Published as B.E. Journal of Applied Economic Policy 17(1).

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