TY  - JOUR
AU  - Schankerman,Mark
AU  - Nadiri,M. Ishaq
TI  - Investment in R&D, Costs of Adjustment and Expectations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 931
PY  - 1982
Y2  - July 1982
UR  - http://www.nber.org/papers/w0931
L1  - http://www.nber.org/papers/w0931.pdf
N1  - Author contact info:
Mark Schankerman
Department of Economics, R.516
London School of Economics
Houghton Street
London WC2A 2AE
UK
Tel: 442079557518
E-Mail: M.Schankerman@lse.ac.uk

M. Ishaq Nadiri
Department of Economics
New York University
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8968
Fax: 212/995-4013
E-Mail: min1@nyu.edu
M1  - published as Mark Schankerman, M. Ishaq Nadiri. "Investment in R&D, Costs of Adjustment, and Expectations," in Zvi Griliches, ed., "R & D, Patents, and Productivity" University of Chicago Press (1984)

AB  - This paper proposes a framework which integrates convex costs of adjustment and expectations formation in the determination of investment decisions in R&D at the firm level. The model is based on cost minimization subject to the firm's expectations of the stream of output and the price of R&D, and results in equations for actual and multiple-span planned investment in R&D and for the realization error as functions of these expectations. The model accommodates alternative mechanisms of expectations formation and provides a methodology for testing these hypotheses empirically. We derive estimable equations and testable parameter restrictions for the rational, adaptive and static expectations hypotheses. The empirical results using pooled firm data strongly reject the rational and static expectations hypotheses and generally support adaptive expectations.
ER  -