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| Author: | Manez, J.A. (et. al) |
| Title: | The role of sunk costs in the decision to invest in R&D |
| Journal: | Journal of Industrial Economics
2009 : DEC, VOL. 57:4, p. 712-735 |
| Index terms: | sunk costs R&D decision making high technology Spain |
| Language: | eng |
| Abstract: | A dynamic empirical model is presented of a firm's R&D decisions, consistent with the existence of sunk R&D costs and taking into account these costs' difference between small and large firms, and among different technological regimes. We estimate a multivariate dynamic discrete choice model relying on firm-level data of manufacturing in Spain for 19902000. Conditional on firm heterogeneity and serially correlated unobservable factors, the finding is that R&D history matters. This true state dependence allows to deduce the existence of sunk R&D costs associated with performing R&D. Sunk R&D costs appear to be higher for large, high-tech firms. |
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