A model of R&D capitalization
AbstractThis paper studies the decision of firms to expense or capitalize R&D expenditures. The firm has an incentive to mismatch the benefits and costs of R&D, expensing a larger portion of R&D when the benefits occur in the long-run and capitalizing a larger portion when the benefits occur in the short-run. There is strategic substitutability between R&D investments and expensing. Accounting standards, market evaluation of capitalization, and firms’ accounting policies can have real effects on innovation.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 39459.
Date of creation: 18 Jan 2004
Date of revision:
Publication status: Published in International Journal of Business and Economics No. 2.Vol. 4(2005): pp. 107-121
Innovation; Expensing; Capitalization; Accounting standards;
Other versions of this item:
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
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