6533b824fe1ef96bd127ff0e
RESEARCH PRODUCT
THE ROLE OF SUNK COSTS IN THE DECISION TO INVEST IN R&D
Amparo SanchisJuan SanchisJuan A. MañezMaría E. Rochina-barrachinasubject
MicroeconomicsEconomics and EconometricsMultivariate statisticsDiscrete choiceAccountingEconomicsState dependenceGeneral Business Management and AccountingUnobservableSunk costsdescription
We present a dynamic empirical model of a firm's R&D decisions that is consistent with the existence of sunk R&D costs, taking into account that these costs may differ between small and large firms, and among different technological regimes. We estimate a multivariate dynamic discrete choice model using firm-level data of Spanish manufacturing for 1990–2000. Conditional on firm heterogeneity and serially correlated unobservable factors, we find that R&D history matters. This true state dependence allows inferring the existence of sunk R&D costs associated with performing R&D. Sunk R&D costs are found to be higher for large, high-tech firms.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2009-12-01 | The Journal of Industrial Economics |