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R & D Behaviour of Indian Firms: A Stochastic Control Model

  • L. K. Raut

    (University of California-San Diego)

This paper develops a dynamic stochastic model to explain the observed pattern of R&D input choices of Indian private firms in terms of firm size, market structure, and science base. The inputs to the production of technological knowledge are taken to be in house R&D activities, and purchase of technology and know-how from foreign and domestic suppliers. The model is estimated with firm level data from light, petro-chemical, and heavy industries. In all three industries larger firms tend to substitute domestic for foreign purchase of technology and technical knowhow; and in heavy industry, larger firms also do more in-house R&D. Monopoly power of a firm in the light industry has no significant effect on its R&D activities; in the heavy industry, higher monopoly power to a firm reduces its purchase of technology, without affecting other R&D activities; in the petro chemical industry, higher monopoly power to a firm reduces its purchase of technology, but this but this reduction is partially offset by an increase in in-house R&D expenditures.

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Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.

Volume (Year): 23 (1988)
Issue (Month): 2 (July)
Pages: 207-229

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Handle: RePEc:dse:indecr:v:23:y:1988:i:2:p:207-229
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