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On R&D Investment


  • Massoud Khazabi


The paper presents a theoretical model of R&D (Research and Development) investment and extensively studies the expensing policy of the development-related costs. Basing itself on an analytical discussion as well as a study of the optimal rate of expensing, the paper shows that a firm’s R&D investment policy and expensing-related costs are influenced by a set of variables; inter alia the stock market effects and corporate income tax rates. Interest rates, tax rates, marginal production costs, stock market indices and the speed of development benefits’ revelation, would also alter the firm’s disclosure and innovation policies conspicuously.

Suggested Citation

  • Massoud Khazabi, 2008. "On R&D Investment," The IUP Journal of Managerial Economics, IUP Publications, vol. 0(2), pages 54-68, May.
  • Handle: RePEc:icf:icfjme:v:06:y:2008:i:2:p:54-68

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    References listed on IDEAS

    1. Sourafel Girma & Holger Görg, 2004. "Outsourcing, Foreign Ownership, and Productivity: Evidence from UK Establishment-level Data," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 817-832, November.
    2. Tomiura, Eiichi, 2005. "Foreign outsourcing and firm-level characteristics: Evidence from Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 19(2), pages 255-271, June.
    3. Holger Görg & Aoife Hanley, 2004. "Does Outsourcing Increase Profitability?," The Economic and Social Review, Economic and Social Studies, vol. 35(3), pages 267-288.
    4. Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2006. "Offshoring in a Knowledge Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 121(1), pages 31-77.
    5. Joskow, Paul L, 1988. "Asset Specificity and the Structure of Vertical Relationships: Empirical Evidence," Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 95-117, Spring.
    6. David J. Teece, 2008. "Firm organization, industrial structure, and technological innovation," World Scientific Book Chapters,in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 11, pages 265-296 World Scientific Publishing Co. Pte. Ltd..
    7. Massimiliano Mazzanti & Sandro Montresor & Paolo Pini, 2009. "The General Profile of the Outsourcing Firm: Evidence for a Local Production System of Emilia Romagna," Chapters,in: Corporate Governance, Organization and the Firm, chapter 8 Edward Elgar Publishing.
    8. Swenson, Deborah L, 2000. "Firm Outsourcing Decisions: Evidence from U.S. Foreign Trade Zones," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 175-189, April.
    9. Almas Heshmati, 2003. "Productivity Growth, Efficiency and Outsourcing in Manufacturing and Service Industries," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 79-112, February.
    10. Bernd Görzig & Andreas Stephan, 2002. "Outsourcing and Firm-level Performance," Discussion Papers of DIW Berlin 309, DIW Berlin, German Institute for Economic Research.
    11. Bartel, Ann P & Lach, Saul & Sicherman, Nachum, 2005. "Outsourcing and Technological Change," CEPR Discussion Papers 5082, C.E.P.R. Discussion Papers.
    12. Lyons, Bruce R., 1995. "Specific investment, economies of scale, and the make-or-buy decision: A test of transaction cost theory," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 431-443, May.
    13. repec:hrv:faseco:4784031 is not listed on IDEAS
    14. Bartel, Ann P & Lichtenberg, Frank R, 1987. "The Comparative Advantage of Educated Workers in Implementing New Technology," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 1-11, February.
    15. Glass, Amy Jocelyn & Saggi, Kamal, 2001. "Innovation and wage effects of international outsourcing," European Economic Review, Elsevier, vol. 45(1), pages 67-86, January.
    16. Gene M. Grossman & Elhanan Helpman, 2002. "Integration versus Outsourcing in Industry Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 85-120.
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