Research and Productivity

27 Pages Posted: 12 Jul 2000 Last revised: 28 Feb 2015

See all articles by Boyan Jovanovic

Boyan Jovanovic

New York University - Department of Economics

Yaw Nyarko

New York University - Leonard N. Stern School of Business - Department of Economics

Date Written: October 1995

Abstract

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.

Suggested Citation

Jovanovic, Boyan and Nyarko, Yaw, Research and Productivity (October 1995). NBER Working Paper No. w5321, Available at SSRN: https://ssrn.com/abstract=225385

Boyan Jovanovic (Contact Author)

New York University - Department of Economics ( email )

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New York, NY 10012
United States

Yaw Nyarko

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-8928 (Phone)
212-995-4186 (Fax)

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