On R&D Investment

The paper presents a theoretical model of R&D investment and extensively studies the capitalization policy of development-related costs. It is shown that a firms R&D investment policy and capitalizing related costs are influenced by a set of variables such as stock market effects and corporate income ta nrates. These results are sharper when spill-over effects are introduced. Interest rates, tax rates, productions marginal cost, stock market indices and speed of development benefits revelation would alter the firms disclosure and innovation policies conspicuously.