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The relationship between R&D and physical investment of firms in science-based industries

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  • Chaoshin Chiao

Abstract

This study is motivated by the one-way-inducement hypothesis that R&D induces (Granger-causes) physical investment, but physical investment does not induce R&D, raised by Lach and Schankerman (1989) and Lach and Rob (1996). It is demonstrated that their results do not hold, after extending the sample that matches their criteria by including more time periods and/or more firms. Namely, it is found that the Granger causality between R&D and physical investment occurs both ways. It is also shown that their contemporary relationship, derived by dynamic simultaneous expressions, is positive in both ways, from current R&D to current physical investment and from current physical investment to current R&D. Moreover, previous R&D affects current physical investment, and previous physical investment also affects current R&D.

Suggested Citation

  • Chaoshin Chiao, 2001. "The relationship between R&D and physical investment of firms in science-based industries," Applied Economics, Taylor & Francis Journals, vol. 33(1), pages 23-35.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:1:p:23-35
    DOI: 10.1080/713758640
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    References listed on IDEAS

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    1. Bronwyn H. Hall, 1992. "Investment and Research and Development at the Firm Level: Does the Source of Financing Matter?," NBER Working Papers 4096, National Bureau of Economic Research, Inc.
    2. John Haltiwanger & Russell Cooper & Laura Power, 1999. "Machine Replacement and the Business Cycle: Lumps and Bumps," American Economic Review, American Economic Association, vol. 89(4), pages 921-946, September.
    3. Bronwyn H. Hall, 1990. "The Manufacturing Sector Master File: 1959-1987," NBER Working Papers 3366, National Bureau of Economic Research, Inc.
    4. Bronwyn H. Hall & Zvi Griliches & Jerry A. Hausman, 1984. "Patents and R&D: Is There A Lag?," NBER Working Papers 1454, National Bureau of Economic Research, Inc.
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    Cited by:

    1. HOSONO Kaoru & MIYAKAWA Daisuke & TAKIZAWA Miho & YAMANOUCHI Kenta, 2016. "Complementarity and Substitutability between Tangible and Intangible Capital: Evidence from Japanese firm-level data," Discussion papers 16024, Research Institute of Economy, Trade and Industry (RIETI).
    2. Erdal Atukeren, 2005. "R&D Races and Spillovers between the EU and the US: Some Causal Evidence," KOF Working papers 05-105, KOF Swiss Economic Institute, ETH Zurich.
    3. Andrea Conte & Marco Vivarelli, 2014. "Succeeding in innovation: key insights on the role of R&D and technological acquisition drawn from company data," Empirical Economics, Springer, vol. 47(4), pages 1317-1340, December.
    4. Giebel, Marek & Kraft, Kornelius, 2015. "The impact of the financial crisis on investments in innovative firms," ZEW Discussion Papers 15-069, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. OA Carboni & G. Medda, 2017. "Do Investment and Innovation Boost Export? An Analysis on European Firms," Working Paper CRENoS 201708, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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