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Industrial Research During the 1980s: Did the Rate of Return Fall?

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  • Bronwyn H. Hall.

Abstract

Hall (1993b) found that the market value of corporate R&D; relative to ordinary capital investment fell precipitously during the 1980s. The present paper examines this result more closely and finds that it was due both to an increase in the value of ordinary capital and to a steep decline in the absolute value of R&D; assets. The latter was concentrated in the electrical, scientific instruments, electronics, and computing sectors. Firm-level productivity results show that the contribution of R&D; to sales or output growth was low during the 1970s and the first half of the 1980s but has increased recently, except in the electrical industry and in the large firm part of the computing, machinery, metals, and motor vehicle industries. The overall explanation for these findings is that the very substantial restructuring of the manufacturing sector during the 1980s raised the valuation of ordinary capital (and of R&D; capital in the medium-technology sectors). At the same time entry by smaller firms and new technology coupled with a speed-up in product cycles eroded the profits in the electrical and computing sectors, leading to a substantial decline in the valuation of these profits.

Suggested Citation

  • Bronwyn H. Hall., 1993. "Industrial Research During the 1980s: Did the Rate of Return Fall?," Economics Working Papers 93-217, University of California at Berkeley.
  • Handle: RePEc:ucb:calbwp:93-217
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    References listed on IDEAS

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    1. Cockburn, Iain & Griliches, Zvi, 1988. "Industry Effects and Appropriability Measures in the Stock Market's Valuation of R&D and Patents," American Economic Review, American Economic Association, vol. 78(2), pages 419-423, May.
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