This paper investigates empirically rm investment behavior in research and development (R&D). Firms make investments in R&D in order to produce innovations. These innovations in turn improve the rm s future productivity level, pro tability and incentives to invest in R&D. Using German rm-level...

In this paper, we estimate a dynamic structural model of a rm s decision to invest in R&D and use it to measure the expected long-run bene t from R&D investment. We apply the model to German rms in ve high-tech manufacturing industries and distinguish rms by whether they sell in just the...