%0 Report
%A Lutz, Stefan
%T R&D, IP, and firm profits in the automotive supplier industry
%J Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)
%D 2013
%U https://hdl.handle.net/20.500.14352/41475
%X Economic theory implies that research and development (R&D) efforts increase firm productivity and ultimately profits. In particular, R&D expenses lead to the development of intellectual property (IP) and IP commands a return that increases overall profits of the firm. This hypothesis is investigated for the North American automotive supplier industry by analyzing a panel of 5000 firms for the years 1950 to 2011.Results indicate that R&D expenses in fact increase profitability at the firm level. In particular, increases in the R&D expense to sales ratio lead to increases in the profit contribution of intangible assets relative to sales. This indicates that more R&D intensive IP should command higher royalty rates per sales when licensed to third parties and within multinational enterprises alike.
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