Study On The Economic Characteristics Of R&D

Research and Development(R&D) is one of the hottest issues in management field, which focus on the effect of R&D on economic growth, industry upgrade, business strategy and micro-level and macro-level R&D incentives. With the development of economy and technology, they gradually blend and knowledge-based economy is emerging. Accordingly, R&D embodies a lot of new economic characteristics. This paper deals with the spillover, option characteristics and property characteristics of R&D. Spillover is induced because R&D is more like public goods, which is non-competitive and non-rivalry. When an R&D result is known, all participants can access to it. When someone uses the R&D result, others can use it also. Spillover can be caused through transnational capital flow, human capital flow, foreign direct investment and R&D branches in foreign countries and can be alleviated by government investment, government praise fund, patent buyout and research joint venture. The option characteristic of R&D stems from the optional opportunities for the decision makers. A lot of real options, such as delaying option, time-to-build option, abandonment option, growth option, shutdown option, stop option, combine option and switch option, are produced, which have the same basic ideas with financial options. Due to separation of ownership and management and subsequent asymmetric information between stockholders and managers, principal-agent problems are common in modern enterprises. Four kinds of problems, including effort problems, horizon problems, differential risk preference problems and asset-use problems, affect R&D investment negatively in different mode. So many alleviating schemes are proposed. In the first part, this paper centers on the spillover of cost-reduced R&D basing on simple vertical structure, complex vertical structure, and Leontief technology in vertical industrial structure. The results show that: (1) Generally, R&D investment in integrated structure is more than that in dispersed structure and approximates the optimized value mostly. (2) The more difficult R&D is, the less R&D investment is. (3) The more spillover is, the more R&D investment is. Therefore, industrial structure suitable for R&D, R&D subsides and R&D diffusion should be encouraged. In the second part, this paper attaches importance to asymmetry between initial volatility and developmental volatility in compound option pricing model and takes the spillover into consideration. The paper point out that the volatility of the expected cash flow, being the underlying assets, is caused mainly by competitive factors. Using the generalized pricing model to compute the classic case, ideal simulation results and sensitivity analyzing results are obtained. In the third part, basing on principal-agent theory and spillover, this paper analyzes R&D property charateristics from the point of dispersed decision, R&D coordination and R&D collaboration. The result indicates that asymmetry between rights and liabilities assumed by the managers hinder R&D investment of enterprises in China. So the incentive and constraint mechanism must be perfected and corporate governance must be refined in order to increase R&D investment in China and improve competitive advantage of Chinese products in international market. Some novel ideas about ideas are put forward and concrete schemes and methods are established in this paper, which provide some new approaches for evaluating R&D accurately and completely.