The Economics of Private Sector R and D Decisionmaking in Aeronautics

Information which can be used in planning to insure commercial research and technology programs which are complementary to internally financed private sector activities are presented. The main concern is to identify the characteristics of productive projects in which firms are unlikely to invest. It is shown that: (1) if it is difficult to assess the commercial relevance of an R&D project or it it is characterized by high technical risk, or a relatively long payback period, private funding will be unlikely; and (2) if a project is large relative to the size of the firm, it is unlikely to be funded in the early stages of the R&D process. Firms tend to underinvest in projects with these characteristics