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Suppliers Dynamic Approach to Invest in R&D with Sunk Costs in Indian Contexts

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DOI: 
DOI: 10.17015/ejbe.2015.015.04
Abstract (2. Language): 
In this paper we test for the presence of sunk costs in suppliers’ R&D activities by analyzing the persistence of these activities using supplier level panel data. We develop and estimate a dynamic discrete choice model where each supplier’s current R&D expenditure is a function, among other factors, of its previous experience in performing R&D activities. The data used is a panel data of Indian suppliers, for the period 2003 - 2013. We find that prior R&D experience significantly affects the current decision to invest in R&D, and that, although important, the effect of prior R&D experience depreciates fairly quickly over time.
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