The existing research finds that R & D investment at firm level has low or even negative performance. And it cannot support the inference that R & D investment has important effect on economic growth. The reason lies in that traditional research based on knowledge capital model estimates average returns of R & D investment and smooths out the firm heterogeneity of returns of R & D investment.This paper constructs a structural model to deal with uncertainty,nonlinearity and heterogeneity of returns of R & D investment. Compared with existing structural models,it takes firm heterogeneity of premium into account,and specifically addresses factors affecting firm demand. It arrives at the conclusions as follows: firstly,the returns of R & D investment are actually uncertain and nonlinear,thereby having very obvious firm heterogeneity; secondly,the returns of R & D investment in individual enterprises can even be higher than average returns several times,which is enough to provide a strong incentives for R & D investment. Firm heterogeneity of returns of R & D investment is the key to the understanding of coexisting of low returns of R & D investment in average sense and the importance of R & D investment to economic growth at macro level. Therefore,it fully believes that R & D investment and resulting productivity improvement can be the main force for promoting sustainable economic development in China in the new normal.
Understanding the Mystery of R & D Investment Retums:The Introduction of Uncertainty,Nonlinearity and Firm Heterogeneity
Journal of Finance and Economics Vol. 42, Issue 09, pp. 121 - 132 (2016) DOI:10.16538/j.cnki.jfe.2016.09.011
Cite this article
Yin Heng, Liu Di. Understanding the Mystery of R & D Investment Retums:The Introduction of Uncertainty,Nonlinearity and Firm Heterogeneity[J]. Journal of Finance and Economics, 2016, 42(9): 121–132.
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