R&D Expenditure as a Response to Peer Influence
51 Pages Posted: 2 Jul 2019 Last revised: 27 Dec 2019
Date Written: July 1, 2019
We identify the endogenous social effects proposed by Manski (1993) in firm R&D spending. By using state-level Uniform Trade Secrets Act (UTSA) enactments as exogenous shocks, we find that focal firms respond positively to peers’ R&D expenditure. The results suggest that managerial learning and relative-wealth concerns are dominating economic mechanisms. This peer effect on R&D spending is more prominent for firms with tighter financial constraints, in higher competitive industries, and having more innovative peers.
Keywords: Peer effect; R&D; trade secret legal protection; managerial learning; relative wealth concerns
JEL Classification: G31, G32, G34, G41
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