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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine

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Volume 17, Issue 1 (Jan 2017)

Issues

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

The Market Value of R&D in Emerging Economies: Evidence from India

Sunil Kanwar
  • Corresponding author
  • Department of Economics, Delhi School of Economics, University of Delhi, Delhi 110007, India
  • Email:
/ Bronwyn H. Hall
  • University of California at Berkeley, NBER, IFS, and NIESR, Berkeley, CA, USA
Published Online: 2017-01-21 | DOI: https://doi.org/10.1515/bejeap-2016-0103

Abstract

We revisit the relationship between market value and innovation in the context of manufacturing firms in a developing country, using data for Indian firms from 2001 through 2010. Surprisingly, we find that financial markets value the R&D investment of Indian firms the same or higher than it values such investment in developed economies such as the United States and European countries, suggesting some degree of underinvestment. The paper explores the use of a proxy for the option value of R&D and finds that this can account for a very small part of the R&D valuation (about 10 %). We also find that the market value–R&D relationship does not vary significantly across industry groups, although these results are rather imprecise.

Keywords: market value; R&D; manufacturing firms

JEL Classification: O34; O32; L60

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Published Online: 2017-01-21


Citation Information: The B.E. Journal of Economic Analysis & Policy, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2016-0103.

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