Our paper studies the effect of knowledge spillovers on firms’ incentives for R&D investment. We test this idea in an augmented Tobin’s Q model framework taken and built up from Mairesse and Siu (1984), in which our one-period-ahead growth rate of Tobin’s average Q plays a role as measure of expected future profitability and investment opportunity. Utilizing the generalized method of moments estimator on a rich data set of 3,718 manufacturing firms from 15 OECD countries over the 2005-2013 period, we report several findings. |
