The Role of Time in Assessing the Economic Effects of R&D |
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Authors: | Mario I. Kafouros Chengqi Wang |
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Affiliation: | 1. Leeds University Business School , University of Leeds , Leeds, UK;2. Nottingham University Business School , University of Nottingham , Nottingham, UK |
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Abstract: | This study investigates the impacts of R&D on firm performance. It extends previous research by constructing alternative stocks of R&D‐Capital that take into account that time plays an important role in assessing the pay‐off of industrial research. The results show that even when we employed R&D‐Capitals that placed more emphasis on the industrial research that had been undertaken 7 years ago, the effects of R&D were very (statistically) significant and relatively high, thereby suggesting that the life of R&D (on average) tends to be long. The results however, vary across organizations depending on both firm size and the technological opportunities that a company faces. It appears that the depreciation rate of R&D investments is higher in the case of technologically sophisticated firms. In contrast, strategic investments in industrial research generate a relatively constant effect on the performance of other firms, supporting the notion that the corresponding returns for such firms decay slowly. |
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Keywords: | Research and development (R& D) time lag performance innovation |
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