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

60 Pages Posted: 7 Nov 2013

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: October 15, 2013

Abstract

Using firm-level data from the German manufacturing sector, we estimate a dynamic, structural model of the firm’s decision to invest in R&D and quantify the cost and longrun benefit of this investment. The model incorporates and quantifies linkages between the firm’s R&D investment, product and process innovations, and future productivity and profits. The dynamic model provides a natural measure of the long-run payoff to R&D as the difference in expected firm value generated by the R&D investment. For the median productivity firm, investment in R&D raises firm value by 3.0 percent in a group of hightech industries but only 0.2 percent in low-tech industries. Simulations of the model show that cost subsidies for R&D can significantly affect R&D investment rates and productivity changes in the high-tech industries.

Keywords: R&D demand, Innovation, Productivity, Dynamic structural model

JEL Classification: L60, O31, O32

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 (October 15, 2013). ZEW - Centre for European Economic Research Discussion Paper No. 13-089. Available at SSRN: https://ssrn.com/abstract=2350761 or http://dx.doi.org/10.2139/ssrn.2350761

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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