NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Market Value of R&D in Weak Innovation Regimes: Evidence from India

Sunil Kanwar, Bronwyn H. Hall

NBER Working Paper No. 21196
Issued in May 2015
NBER Program(s):   PR

We revisit the relationship between market value and innovation in the context of manufacturing firms in a developing country, using Indian data from 2001 through 2010. Surprisingly, we find that financial markets value the R&D investment of Indian firms the same or higher than such investment is valued in developed economies like the US. Using a proxy for the option value of R&D, we find that this accounts for a very small part of the R&D valuation (5% at most). We also find that the market value-R&D relationship does not vary significantly across industry groups, although these results are imprecise.

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Document Object Identifier (DOI): 10.3386/w21196

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