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Estimating dynamic R&D choice: an analysis of costs and long-run benefits
journal contributionposted on 2023-05-19, 13:17 authored by Peters, B, Roberts, MJ, Vuong, VA, Fryges, H
This article estimates a dynamic structural model of discrete Research and Development (R&D)investment and quantiﬁes its cost and long-run beneﬁt for German manufacturing ﬁrms. The model incorporates linkages between R&D choice, product and process innovations, and future productivity and proﬁts. The long-run payoff to R&D is the proportional difference in expected ﬁrm value generated by the investment. It increases ﬁrm value by 6.7% for the median ﬁrm in high-tech industries but only 2.8% in low-tech industries. Simulations show that reductions in maintenance costs of innovation signiﬁcantly raise investment rates and productivity, whereas reductions in startup costs have little effect.
Publication titleRand Journal of Economics
Place of publication810 East 10Th St, Lawrence, USA, Ks, 66044
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