R&D and Market Value: Appropriability vs. Preemption
The recent empirical studies on innovation and market value suggest that R&D has a strong complementarity with market share in the market valuation of firms. Blundell, Griffith and Reenen (1999) argue that it represents the strategic preemptive effect, while Hall and Vopel (1997) suggest a Schumpeterian reason (the cost of financing R&D is lower for large firms). The theoretical framework of these studies is the classical work by Griliches (1981), which postulates that the market value of firm is given by the sum of the values of physical capital and R&D capital with respective multipliers. However, non-rivalry in using new knowledge within a firm makes this framework highly questionable. This paper examines the nexus between R&D and market value, based on a simple but new structural model. Major findings are the following. First, the new model shows that the market evaluation of R&D may well be high for a firm with a large market share, simply due to its appropriability advantage. Second, our estimation based on the data of the Japanese firms shows that the new specification performs better. Third, it shows that there is no statistical support for the prevalence of preemption effect.
|Length:||23,  p.|
|Date of creation:||Feb 2004|
|Contact details of provider:|| Postal: 2-1 Naka, Kunitachi City, Tokyo 186-8601|
Web page: http://www.iir.hit-u.ac.jp/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hit:iirwps:04-03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Digital Resources Section, Hitotsubashi University Library)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.