A model of R&D capitalization
This paper studies the decision of firms to expense or capitalize R&D expenditures. The firm has an incentive to mismatch the benefits and costs of R&D, expensing a larger portion of R&D when the benefits occur in the long-run and capitalizing a larger portion when the benefits occur in the short-run. There is strategic substitutability between R&D investments and expensing. Accounting standards, market evaluation of capitalization, and firms’ accounting policies can have real effects on innovation.
|Date of creation:||18 Jan 2004|
|Date of revision:|
|Publication status:||Published in International Journal of Business and Economics No. 2.Vol. 4(2005): pp. 107-121|
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