How Risky is R an D? A Financial Approach
The Review of Economics and Statistics
1990
In order to understand the relationship between market structure and the risk of innovation, this paper proposes a synthesis between the capital asset pricing model and simple models of industrial organization. The theoretical section of the paper discusses the real determinants of R&D riskiness, finding that several unique features of R&D assets may influence their systematic risk, including their strategic nature and random arrival as well as the firm's industry context. The empirical results suggest that there is a considerable systematic risk premium associated with R&D that can be partially offset by firm size and market concentration. Copyright 1990 by MIT Press.
- DOI
- 10.2307/2109719
- Volume
- 72 (2)
- Pages
- 296
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