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Empirical Modeling of R&D Demand in a Dynamic Framework
Author(s) -
Roberts Mark J.,
Vuong Van Anh
Publication year - 2013
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1093/aepp/ppt011
Subject(s) - subsidy , investment (military) , economics , productivity , microeconomics , empirical research , industrial organization , macroeconomics , market economy , philosophy , epistemology , politics , political science , law
Empirical analysis of firm‐level investment in research and development (R&D) and its effect on innovation patterns and productivity has advanced as a result of innovation surveys in many countries. The weak link in the analysis of these surveys is the empirical model of firm R&D choice. In this paper we summarize how a dynamic, structural model of firm investment can be used to estimate firm demand for R&D with the data collected in innovation surveys. The estimates provide a natural measure of the expected benefit to the firm of investing in R&D. They also allow the researcher to simulate how the firm's R&D investment will respond to factors that shift cost or demand such as a policy change designed to subsidize R&D expenditures or provide financial support to firms with less favorable access to capital markets.