Privatization and economic returns to R & D investments

This article analyzes the impact of privatization on firms' expected R & D economic performance. We examine the effect of R & D investments on market value for a panel of privatized firms in Western Europe matched with different panels of privately owned firms. The results show that the effect is systematically higher for privately owned firms as compared to privatized firms. Moreover, the market valuation of R & D investments increases over time for privatized firms. This evidence is consistent with the hypothesis that organizational inertia defers the impact of privatizion on firms' R & D performance.