1. Explain how any intangible capital effects of R&D intensity can reflect the effects of market power and/or superior efficiency.
q = 1.825 + 7.358 profit margin + 0.0220 growth -
(3.70) (2.77) (0.08)
0.711 beta + 9.046 r&d/s
R^2 = 55.3%, F statistic = 7.73
Are these results consistent with the idea that r&d gives rise to a type of intangible capital?
Please see the attached file.
Understanding how firms build economic sources of sustainable future cash flows has been a key area of research. Lindenberg and Ross (1981) started the tradition of capturing market data through Tobin's q ratio to understand this phenomenon when they used Tobin's q for the first time. Research and development expenditure by the firms although does not create much tangible assets in short run, the intangible capital build in the form of knowledge, intellectual property, etc. is one source of sustainable future cash flows for the firm. Hirschey (1985) investigated whether research and development (R&D) ...
This job reiterates how firms build economic sources of sustainable future cash flows.