Market Value of the Firms and R&D Investment: Theoretical Overview and Empirical Estimation for the Panel of Countries

International Journal of Business Management and Administration, Vol. 2(3), pp. 055-063, March 2013, ISSN 2327-3100

9 Pages Posted: 2 Feb 2013 Last revised: 10 Apr 2013

See all articles by Dushko Josheski

Dushko Josheski

University Goce Delcev

Marija Sopova

University Goce Delcev

Date Written: January 31, 2013

Abstract

The aim of this paper is to investigate the issue of R&D investment and the market value of the firm. This idea dating back from Arrow paper, later developed by Paul Romer, but in the area of economic growth. Zvi Griliches (1979), first introduced the production function, which later would be used in a vast literature from this area. In the theoretical section of this paper we are describing Tobin’s original model, and Abel’s (1984) model, this models relates Tobin’s quotient with intangible assets of the company. In the empirical part we develop cross-section time series model (Feasible Generalized Least Squares Model), for a panel of countries in Europe including UK and Turkey, in total of 11 panels. Later we test that model by estimating the marginal effects of R&D investment with Tobin’s q on a small economy such as R. Macedonia. The results exert positive and statistically significant relationship between market value of the firms and R&D investment.

Keywords: Tobin’s q, R&D, knowledge absorption

JEL Classification: D92

Suggested Citation

Josheski, Dushko and Sopova, Marija, Market Value of the Firms and R&D Investment: Theoretical Overview and Empirical Estimation for the Panel of Countries (January 31, 2013). International Journal of Business Management and Administration, Vol. 2(3), pp. 055-063, March 2013, ISSN 2327-3100, Available at SSRN: https://ssrn.com/abstract=2209759 or http://dx.doi.org/10.2139/ssrn.2209759

Dushko Josheski (Contact Author)

University Goce Delcev ( email )

Stip
Macedonia
+389 32 550 000 (Phone)
+389 32 390 700 (Fax)

HOME PAGE: http://www.ugd.edu.mk/

Marija Sopova

University Goce Delcev ( email )

Stip
Macedonia

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