The Interaction Between Capital Investment and R&D in Science-Based Firms

Saul Lach, Mark Schankerman

Research output: Working paper/preprintWorking paper

Abstract

This paper analyzes the interaction among R&D, capital investment , and the stock market rate of return for 191 firms in science-based industries for the period 1973-1981. Using a framework based on dynamic factor analysis, we show how several prominent hypotheses about the determination of R&D and investment generate testable parameter restrictions. The data indicate that R&D Granger-causes investment, but that investment does not Granger-cause R&D. We use this finding to examine the validity of those hypotheses, to characterize the movements over time of R&D and investment, and to measure the stock market valuation of these movements.
Original languageEnglish
Place of PublicationCambridge, Mass
PublisherNational Bureau of Economic Research
Number of pages37
DOIs
StatePublished - 1987

Publication series

NameNBER working paper series
PublisherNational Bureau of Economic Research
Volumeno. w2377

Bibliographical note

September 1987.

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