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Estimating Dynamic R&D Demand: An Analysis of Costs and Long-Run Benefits

Listed author(s):
  • Bettina Peters
  • Mark J. Roberts
  • Van Anh Vuong
  • Helmut Fryges

This paper estimates a dynamic structural model of discrete R&D investment and quantifies its cost and long-run benefit for German manufacturing firms. The dynamic model incorporates linkages between the firm's R&D choice, product and process innovations, and future productivity and profits. The long- run payoff to R&D is measured as the proportional difference in expected firm value generated by the R&D investment. It increases firm value by 6.7 percent for the median firm in high-tech manufacturing industries but only 2.8 percent in low-tech industries. Simulations show that reductions in maintence costs of innovation significantly raise investment rates and productivity while reductions in startup costs have little effect.

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File URL: http://www.nber.org/papers/w19374.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19374.

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Date of creation: Aug 2013
Handle: RePEc:nbr:nberwo:19374
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  1. repec:crs:wpaper:9833 is not listed on IDEAS
  2. Bronwyn H. Hall, 2011. "Innovation and Productivity," NBER Working Papers 17178, National Bureau of Economic Research, Inc.
  3. Mohnen, Pierre & Mairesse, Jacques, 2010. "Using Innovation Surveys for Econometric Analysis," MERIT Working Papers 023, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  4. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1986. "Research and Development and Intraindustry Spillovers: An Empirical Application of Dynamic Duality," NBER Working Papers 2002, National Bureau of Economic Research, Inc.
  5. Bruno Crépon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation and Productivity : An Econometric Analysis at the Firm Level," Working Papers 98-33, Centre de Recherche en Economie et Statistique.
  6. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring.
  7. Hall, Bronwyn H. & Mairesse, Jacques & Mohnen, Pierre, 2010. "Measuring the Returns to R&D," MERIT Working Papers 006, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  8. Bee Yan Aw & Mark J. Roberts & Daniel Yi Xu, 2009. "R&D Investment, Exporting, and Productivity Dynamics," NBER Working Papers 14670, National Bureau of Economic Research, Inc.
  9. Mark J. Roberts & Van Anh Vuong, 2013. "Empirical Modeling of R&D Demand in a Dynamic Framework," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 35(2), pages 185-205.
  10. Zvi Griliches, 1991. "The Search for R&D Spillovers," NBER Working Papers 3768, National Bureau of Economic Research, Inc.
  11. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1991. "Product Demand, Cost of Production, Spillovers, and the Social Rate of Return to R&D," NBER Working Papers 3625, National Bureau of Economic Research, Inc.
  12. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  13. Mark J. Roberts & Daniel Yi Xu & Xiaoyan Fan & Shengxing Zhang, 2012. "The Role of Firm Factors in Demand, Cost, and Export Market Selection for Chinese Footwear Producers," NBER Working Papers 17725, National Bureau of Economic Research, Inc.
  14. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  15. Fred Gault (ed.), 2013. "Handbook of Innovation Indicators and Measurement," Books, Edward Elgar Publishing, number 14427.
  16. Daniel Yi Xu & Mark Roberts, 2012. "A Structural Model of Dmand, Cost, and Export Market Selection for Chinese Footwear Producers," 2012 Meeting Papers 294, Society for Economic Dynamics.
  17. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
  18. Crepon, B. & Duguet, E. & Mairesse, J., 1998. "Research Investment, Innovation and Productivity: An Econometric Analysis at the Firm Level," Papiers d'Economie Mathématique et Applications 98.15, Université Panthéon-Sorbonne (Paris 1).
  19. Yi Daniel Xu, 2008. "A Structural Empirical Model of R&D, Firm Heterogeneity , and Industry Evolution," 2008 Meeting Papers 744, Society for Economic Dynamics.
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