TY  - JOUR
AU  - Jovanovic,Boyan
AU  - Nyarko,Yaw
TI  - Research and Productivity
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5321
PY  - 1995
Y2  - October 1995
UR  - http://www.nber.org/papers/w5321
L1  - http://www.nber.org/papers/w5321.pdf
N1  - Author contact info:
Boyan Jovanovic
New York University
Department of Economics
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8953
Fax: 212/995-4186
E-Mail: Boyan.Jovanovic@nyu.edu

Yaw Nyarko
Department of Economics
New York University
19 W. 4th Street, 6th Floor
New York, NY 10012
Tel: 212-998-8928;  yaw.nyarko@nyu.edu
E-Mail: yaw.nyarko@nyu.edu
AB  - We model research as a signal on an unknown parameter of a technology.  We distinguish applied from basic research and show that firms in the same industry can optimally choose different research portfolios, and that basic research can seem to have a higher rate of return than applied research, even though it really doesn't -- essentially, firms on a 'fast track' upgrading policy opt for basic research but fast and slow-track upgrading policies can coexist in a long-run equilibrium. We also derive the lag structure for how R&D affects the firm's stock of knowledge.  To a first approximation, the lags decay geometrically (as is typically assumed in practice) but the rate of decay is endogenous, and depends on how fast the firm is upgrading its technology.
ER  -