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R & D Behaviour of Indian Firms: A Stochastic Control Model

L. K. RAUT
Indian Economic Review
New Series, Vol. 23, No. 2 (July-December 1988), pp. 207-229
Stable URL: http://www.jstor.org/stable/29793488
Page Count: 23
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
R & D Behaviour of Indian Firms: A Stochastic Control Model
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Abstract

This paper develops a dynamic stochastic model to explain the observed pattern of R & D input choices of Indian private firms in terms of firm size, market structure, and science base. The inputs to the production of technological knowledge are taken to be in-house R&D activities, and purchase of technology and know-how from foreign and domestic suppliers. The model is estimated with firm level data from light, petro-chemical, and heavy industries. In all three industries larger firms tend to substitute domestic for foreign purchase of technology and technical know-how; and in heavy industry, larger firms also do more in-house R&D. Monopoly power of a firm in the light industry has no significant effect on its R&D activities; ln the heavy industry, higher monopoly power to a firm reduces its purchase of technology without affecting other R&D activities; in the petro-chemical industry, higher monopoly power to a firm reduces its purchase of technology, but this reduction is partially offset by an increase in in-house R&D expenditures.

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