Dynamics of R&D and Investment in the Scientific Sector
This paper empirically explores the dynamic interactions among research and development, capital investment, and the stock market performance of 191 firms in science-based industries during the period 1973-81. Using a framework based on dynamic factor analysis, the authors test asymmetric specifications of the dynamics between R&D and investment. The data indicate that R&D Granger-causes investment, but that investment does not Granger-cause R&D. The authors discuss interpretations of this causal ordering, characterize the stylized facts of the movements over time of R&D and investment, and measure the stock market valuation of these movements. Copyright 1989 by University of Chicago Press.
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