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The Market Value of R&D in Emerging Economies: Evidence from India

Author

Listed:
  • Kanwar Sunil

    (Department of Economics, Delhi School of Economics, University of Delhi, Delhi 110007, India)

  • Hall Bronwyn H.

    (University of California at Berkeley, NBER, IFS, and NIESR, Berkeley, CA, USA)

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 United States 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 %). We also find that the market value–R&D relationship does not vary significantly across industry groups, although these results are rather imprecise.

Suggested Citation

  • Kanwar Sunil & Hall Bronwyn H., 2017. "The Market Value of R&D in Emerging Economies: Evidence from India," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(1), pages 1-22, February.
    • Handle: RePEc:bpj:bejeap:v:17:y:2017:i:1:p:22:n:8
    DOI: 10.1515/bejeap-2016-0103
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    References listed on IDEAS

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    Cited by:

    1. René Belderbos & Jinhyuck (Joseph) Park & Martin Carree, 2021. "Do R&D investments in weak IPR countries destroy market value? The role of internal linkages," Strategic Management Journal, Wiley Blackwell, vol. 42(8), pages 1401-1431, August.
    2. Sunil Kanwar & Stefan Sperlich, 2023. "Direct foreign investment and intellectual property reform in the South," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(6), pages 1456-1477, August.
    3. Sunil Kanwar, 2022. "Innovation and Government Bureaucracy," Working papers 328, Centre for Development Economics, Delhi School of Economics.
    4. Shailu Singh, 2018. "Patenting Matters, Not Patents: Firm Market Value in Indian Manufacturing," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(1), pages 67-87, February.
    5. Ridwan Ah Sheikh & Sunil Kanwar, 2022. "Does Host Country Intellectual Property Protection Matter for Technology-Intensive Import Flows?," Working papers 329, Centre for Development Economics, Delhi School of Economics.

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    More about this item

    Keywords

    market value; R&D; manufacturing firms;
    All these keywords.

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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