This paper reviews the empirical literature on rates of return on R&D and interprets the economic significance of these estimates using a semi-endogenous growth model with a calibrated knowledge production sector. We analyse how R&D subsidies, a reduction of entry barriers for start-ups and...

This paper formulates the intertemporal R&D investment decision problem of private firms within an optimal stochastic control framework. The paper derives explicitly the R&D investment decision rule and the cross equations parameter restrictions imposed by the hypothesis of rational...