1. Comments on Pablo Sanguinetti, “Innovation and R&D expenditures in Argentina”; and José Miguel Benavente, “Rates of return and the industrial structure of R&D in Chile” Armando Castelar Pinheiro IPEA and UFRJ Conference “R&D and Innovation in the Development Process” Universitat Pompeu Fabra, Barcelona June 9, 2005

2. Some common stylized facts Only a minority of firms invest on R&D Firms invest only a small fraction of their sales on R&D R&D activities are influenced mainly by sector characteristics Larger firms invest proportionately more Liquidity constraints are a cause of low R&D investment in Latin America

3. Sanguinetti’s “Innovation and R&D expenditures in Argentina” Research questions: –Main determinants of R&D and innovation expenditures –Impact of FONTAR Main findings: –Size and market share matter –Foreign firms spend more than national ones on R&D –Sector characteristics matter (much) more than firm attributes –FONTAR has had a significant impact on R&D spending –R&D and innovation determinants and behavior are not always the same –Selection bias is very important

4. Sanguinetti’s “Innovation and R&D expenditures in Argentina” Comments: –Further analysis of endogeneity of regressors –Could tinkering with accounts be affecting assessment of FONTAR? –There seems to be too much noise in the R&D data: how come the tobacco industry invests so much on R&D? –FONTAR seems too important –Role of export orientation?

5. Benavente’s “Rates of return and the industrial structure of R&D in Chile” Research questions: –Rate of return on R&D investment –Why do firms invest so little on R&D? Main findings: –Rate of return on R&D is twice that of physical investment –Less financially constrained firms invest more on R&D, but the marginal product of their projects is lower –Initial impact of R&D investment is (highly) negative, but the long-term impact is positive

6. Benavente’s “Rates of return and the industrial structure of R&D in Chile” Comments: –Selection bias: Only firms that invest on R&D are considered (upward bias) Unprofitable firms with good projects may not invest (downward bias) –Growth measured using output rather than value added: could outsourcing have biased results? –Productivity increases and monopoly rents are sometimes mixed up –Lack of skilled personnel as an explanation for not undertaking begs the question of why are these workers not hired in the market

7. Benavente’s “Rates of return and the industrial structure of R&D in Chile” Comments: –Institutional factors and sunk investment are alternative causes for delay in adopting of innovations –Difference in risk between investment in R&D and physical capital is also important –Measurement of rate of return of R&D investment disregards time profile

8. Benavente’s “Rates of return and the industrial structure of R&D in Chile”

9. Other issues Sensitivity to sample selection Institutional factors (e.g., protection of intellectual property) are not considered in either paper Does state ownership matter? (Is there any SOE left?) What sector characteristics are relevant to explain R&D investment?