Estimating dynamic R&D demand: An analysis of costs and long-run benefits
Bettina Peters (),
Mark Roberts (),
Van Anh Vuong and
No 13-089, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research
Using firm-level data from the German manufacturing sector, we estimate a dynamic, structural model of the firm's decision to invest in R&D and quantify the cost and longrun benefit of this investment. The model incorporates and quantifies linkages between the firm's R&D investment, product and process innovations, and future productivity and profits. The dynamic model provides a natural measure of the long-run payoff to R&D as the difference in expected firm value generated by the R&D investment. For the median productivity firm, investment in R&D raises firm value by 3.0 percent in a group of hightech industries but only 0.2 percent in low-tech industries. Simulations of the model show that cost subsidies for R&D can significantly affect R&D investment rates and productivity changes in the high-tech industries.
Keywords: R&D demand; Innovation; Productivity; Dynamic structural model (search for similar items in EconPapers)
JEL-codes: L60 O31 O32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-eff, nep-ind, nep-ino and nep-tid
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Working Paper: Estimating Dynamic R&D Demand: An Analysis of Costs and Long-Run Benefits (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:13089
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