TY  - JOUR
AU  - Lach,Saul
AU  - Schankerman,Mark
TI  - The Interaction Between Capital Investment and R&D in Science-Based Firms
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2377
PY  - 1987
Y2  - August 1987
UR  - http://www.nber.org/papers/w2377
L1  - http://www.nber.org/papers/w2377.pdf
N1  - Author contact info:
Saul Lach
Department of Economics
Hebrew University
Jerusalem, 91905
ISRAEL
Tel: 972-2-5883253
Fax: 972-2-5816071
E-Mail: saul.lach@huji.ac.il

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
AB  - This paper analyzes the interaction among R&D, capital investment , and the stock market rate of return for 191 firms in science-based industries for the period 1973-1981. Using a framework based on dynamic factor analysis, we show how several prominent hypotheses about the determination of R&D and investment generate testable parameter restrictions. The data indicate that R&D Granger-causes investment, but that investment does not Granger-cause R&D. We use this finding to examine the validity of those hypotheses, to characterize the movements over time of R&D and investment, and to measure the stock market valuation of these movements.
ER  -