Does the Market Value R&D Investment by European Firms? Evidence from a Panel of Manufacturing Firms in France, Germany, and Italy

43 Pages Posted: 19 Apr 2004 Last revised: 11 Dec 2022

See all articles by Bronwyn H. Hall

Bronwyn H. Hall

University of California at Berkeley; National Bureau of Economic Research (NBER); Institute for Fiscal Studies (IFS); Max Planck Institute for Innovation and Competition

Raffaele Oriani

Luiss Guido Carli University

Date Written: April 2004

Abstract

Several studies based on US and UK data have used market value as an indicator of the firm''s expected R&D performance. However, there exist no investigations for the continental countries in the European Union, partly because the analysis is complicated by data availability problems. In this paper we take a first step towards filling this gap using a newly constructed panel dataset of firms that are publicly traded in France, Germany, and Italy. Controlling for either permanent unobserved firm effects or sample selection due to the voluntary nature of R&D disclosure, we find that the relative shadow value of R&D in France and Germany is remarkably similar both to each other and to that in the US or the UK during the same period In contrast, we find that R&D in publicly traded Italian firms is not valued by financial markets on average. However, when we control for the presence of a single large shareholder, we find that both French and Italian firms have high R&D valuations when no single shareholder holds more than one third of the firm, but that R&D is essentially not valued in the other firms.

Suggested Citation

Hall, Bronwyn H. and Oriani, Raffaele, Does the Market Value R&D Investment by European Firms? Evidence from a Panel of Manufacturing Firms in France, Germany, and Italy (April 2004). NBER Working Paper No. w10408, Available at SSRN: https://ssrn.com/abstract=528989

Bronwyn H. Hall (Contact Author)

University of California at Berkeley ( email )

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Berkeley, CA 94720-3880
United States

HOME PAGE: http://emlab.berkeley.edu/users/bhhall/index.html

National Bureau of Economic Research (NBER)

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Institute for Fiscal Studies (IFS)

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Max Planck Institute for Innovation and Competition

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Raffaele Oriani

Luiss Guido Carli University ( email )

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Rome, 00196
Italy
+390685225908 (Phone)

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