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

55 Pages Posted: 30 Aug 2013 Last revised: 8 Oct 2014

See all articles by Bettina Peters

Bettina Peters

Center for European Economic Research (ZEW)

Mark J. Roberts

Pennsylvania State University - College of the Liberal Arts - Department of Economics; National Bureau of Economic Research (NBER)

Van Anh Vuong

University of Cologne

Helmut Fryges

Technopolis Group; University of Tasmania - Australian Innovation Research Centre; Center for European Economic Research (ZEW)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2013

Abstract

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.

Suggested Citation

Peters, Bettina and Roberts, Mark J. and Vuong, Van Anh and Fryges, Helmut, Estimating Dynamic R&D Demand: an Analysis of Costs and Long-Run Benefits (August 2013). NBER Working Paper No. w19374. Available at SSRN: https://ssrn.com/abstract=2318277

Bettina Peters (Contact Author)

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
+496211235174 (Phone)
+496211235170 (Fax)

HOME PAGE: http://www.zew.de

Mark J. Roberts

Pennsylvania State University - College of the Liberal Arts - Department of Economics ( email )

513 Kern Graduate Building
University Park, PA 16802-3306
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Van Anh Vuong

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Helmut Fryges

Technopolis Group ( email )

Grosse Seestraße 26
Frankfurt am Main, 60384
Germany

University of Tasmania - Australian Innovation Research Centre ( email )

1 College Road
Sandy Bay TAS, Tasmania 7005
Australia

HOME PAGE: http://www.utas.edu.au/airc

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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