TY  - JOUR
AU  - Lach,Saul
AU  - Rob,Rafael
TI  - R&D, Investment and Industry Dynamics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4060
PY  - 1992
Y2  - April 1992
UR  - http://www.nber.org/papers/w4060
L1  - http://www.nber.org/papers/w4060.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
AB  - We present a model of industry evolution where the dynamics are driven by a process of endogenous innovations, followed by subsequent embodiments in physical capital. Traditionally, the only distinction between R&D and physical investment was one of labeling: the first process accumulates an intangible stock (knowledge) while the second accumulates physical capital; both stocks affect output in a symmetric fashion. We argue that the story is not that simple, and there is more to it than differences in the object of accumulation. Our model stresses the causal relationship between past R&D expenditures and current investments in machinery and equipment. This causality pattern, which is supported by the data, also explains the observed higher volatility of physical investment (relative to R&D expenditures).
ER  -