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Research and Productivity

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  • Boyan Jovanovic
  • Yaw Nyarko

Abstract

We model research as a signal on an unknown parameter of a technology. We distinguish applied from basic research and show that firms in the same industry can optimally choose different research portfolios, and that basic research can seem to have a higher rate of return than applied research, even though it really doesn't -- essentially, firms on a 'fast track' upgrading policy opt for basic research but fast and slow-track upgrading policies can coexist in a long-run equilibrium. We also derive the lag structure for how R&D affects the firm's stock of knowledge. To a first approximation, the lags decay geometrically (as is typically assumed in practice) but the rate of decay is endogenous, and depends on how fast the firm is upgrading its technology.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5321.

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Date of creation: Oct 1995
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Publication status: published as Navaretti, G. Barba, et al. (eds.) Creation and transfer of knowledge: Institutions and incentives. Heidelberg and New York: Springer, 1998.
Handle: RePEc:nbr:nberwo:5321

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  1. Mansfield, Edwin, 1980. "Basic Research and Productivity Increase in Manufacturing," American Economic Review, American Economic Association, American Economic Association, vol. 70(5), pages 863-73, December.
  2. Ariel Pakes & Mark Schankerman, 1984. "The Rate of Obsolescence of Patents, Research Gestation Lags, and the Private Rate of Return to Research Resources," NBER Chapters, National Bureau of Economic Research, Inc, in: R & D, Patents, and Productivity, pages 73-88 National Bureau of Economic Research, Inc.
  3. Doms, Mark & Dunne, Timothy & Roberts, Mark J., 1995. "The role of technology use in the survival and growth of manufacturing plants," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(4), pages 523-542, December.
  4. Frank R. Lichtenberg & Donald Siegel, 1989. "The Impact of R&D Investment On Productivity - New Evidence Using Linked R&D-LRD Data," NBER Working Papers 2901, National Bureau of Economic Research, Inc.
  5. Manuel Trajtenberg & Rebecca Henderson & Adam Jaffe, 1992. "Ivory Tower Versus Corporate Lab: An Empirical Study of Basic Research and Appropriability," NBER Working Papers 4146, National Bureau of Economic Research, Inc.
  6. Lach, Saul & Schankerman, Mark, 1989. "Dynamics of R&D and Investment in the Scientific Sector," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 880-904, August.
  7. Hulten, Charles R. & Wykoff, Frank C., 1981. "The estimation of economic depreciation using vintage asset prices : An application of the Box-Cox power transformation," Journal of Econometrics, Elsevier, Elsevier, vol. 15(3), pages 367-396, April.
  8. Oliner, Stephen D, 1996. "New Evidence on the Retirement and Depreciation of Machine Tools," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 34(1), pages 57-77, January.
  9. Bronwyn H. Hall, 1989. "The Impact of Corporate Restructuring on Industrial Research and Development," NBER Working Papers 3216, National Bureau of Economic Research, Inc.
  10. Adams, James D, 1990. "Fundamental Stocks of Knowledge and Productivity Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(4), pages 673-702, August.
  11. Pakes, Ariel & Schankerman, Mark A., 1978. "The Rate of Obsolescence of Knowledge, Research Gestation Labs, and the Private Rate of Return to Research Resources," Working Papers, C.V. Starr Center for Applied Economics, New York University 78-13, C.V. Starr Center for Applied Economics, New York University.
  12. Link, Albert N, 1981. "Basic Research and Productivity Increase in Manufacturing: Additional Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 71(5), pages 1111-12, December.
  13. Sudipto Bhattacharya and Dilip Mookherhee., 1984. "Portfolio Choice in Research and Development," Research Program in Finance Working Papers, University of California at Berkeley 147, University of California at Berkeley.
  14. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(4), pages 561-83, August.
  15. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
  16. Ricardo J. Caballero & Adam B. Jaffe, 1993. "How High are the Giants' Shoulders: An Empirical Assessment of Knowledge Spillovers and Creative Destruction in a Model of Economic Growth," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1993, Volume 8, pages 15-86 National Bureau of Economic Research, Inc.
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