Firms’ R&D Dilemma: To Undertake Or Not To Undertake R&D
AbstractIt is well known that in most industries a significant proportion of firms do not perform innovative activities. Although empirical studies on the determinants of R&D often have taken this fact into account by considering the dependent variable as a censured one, there is not an explicit theoretical model to explain the zeros. The concern of this letter is to discuss a simple theoretical model where firms simultaneously decide whether to undertake or not R&D activities jointly with the l evel of the R&D investment. We show that a firm performs R&D activities only when its optimal level of R&D expenditure is higher than a threshold. Additionally, we show that both the probability of undertaking R&D activities and the R&D expenditure increase with market power, with the elasticity of demand with respect to quality and with the elasticity of quality with respect to R&D. Finally, from this simple theoretical framework we discuss a suitable econometric model that threats these decisions simultaneously.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Universidade de Vigo, Departamento de Economía Aplicada in its series Working Papers with number 0208.
Length: 11 pages
Date of creation: Oct 2002
Date of revision:
R&D; thresholds; Tobit model.;
Other versions of this item:
- Xulia Gonzalez & Consuelo Pazo, 2004. "Firms' R&D dilemma: to undertake or not to undertake R&D," Applied Economics Letters, Taylor & Francis Journals, vol. 11(1), pages 55-59.
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Griliches, Zvi, 1990.
"Patent Statistics as Economic Indicators: A Survey,"
Journal of Economic Literature,
American Economic Association, vol. 28(4), pages 1661-1707, December.
- Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
- Zvi Griliches, 1990. "Patent Statistics as Economic Indicators: A Survey," NBER Working Papers 3301, National Bureau of Economic Research, Inc.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975.
"Monopolistic Competition and Optimum Product Diversity,"
The Warwick Economics Research Paper Series (TWERPS)
64, University of Warwick, Department of Economics.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
- Maria Laura Parisi & Alessandro Sembenelli, 2001.
"Is Private R&D Spending Sensitive to Its Price? Empirical Evidence on Panel Data for Italy,"
Boston College Working Papers in Economics
493, Boston College Department of Economics.
- Maria Parisi & Alessandro Sembenelli, 2003. "Is Private R & D Spending Sensitive to Its Price? Empirical Evidence on Panel Data for Italy," Empirica, Springer, vol. 30(4), pages 357-377, December.
- Cohen, Wesley M & Klepper, Steven, 1996. "A Reprise of Size and R&D," Economic Journal, Royal Economic Society, vol. 106(437), pages 925-51, July.
- A. Mitchell Polinsky & Steven Shavell, 1999.
"Corruption and Optimal Law Enforcement,"
NBER Working Papers
6945, National Bureau of Economic Research, Inc.
- repec:fth:inseep:9833 is not listed on IDEAS
- Nelson, Forrest D., 1977. "Censored regression models with unobserved, stochastic censoring thresholds," Journal of Econometrics, Elsevier, vol. 6(3), pages 309-327, November.
- Bruno Crepon & Emmanuel Duguet & Jacques Mairesse, 1998.
"Research, Innovation, and Productivity: An Econometric Analysis at the Firm Level,"
NBER Working Papers
6696, National Bureau of Economic Research, Inc.
- Bruno Crepon & Emmanuel Duguet & Jacques Mairessec, 1998. "Research, Innovation And Productivi[Ty: An Econometric Analysis At The Firm Level," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 7(2), pages 115-158.
- Bruno Crépon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation and Productivity : An Econometric Analysis at the Firm Level," Working Papers 98-33, Centre de Recherche en Economie et Statistique.
- Cohen, Wesley M & Klepper, Steven, 1992. "The Anatomy of Industry R&D Intensity Distributions," American Economic Review, American Economic Association, vol. 82(4), pages 773-99, September.
- repec:fth:harver:1473 is not listed on IDEAS
- Sandro Montresor & Antonio Vezzani, 2014. "On the R&D giants' shoulders: Do FDI help to stand on them?," JRC-IPTS Working Papers on Corporate R&D and Innovation 2014-01, Institute of Prospective Technological Studies, Joint Research Centre.
- Elena Cefis, 2008. "The Impact of M&A on Technology Sourcing Strategies," LEM Papers Series 2008/25, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- E. Cefis & M.L. Ghita, 2008. "Post Merger Innovative Patterns in Small and Medium Firms," Working Papers 08-09, Utrecht School of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Patricia González Piñeiro).
If references are entirely missing, you can add them using this form.