The effect of R D on performance of high- tech industries: new evidence from Iran

The main objective of this paper is to evaluate the effect of R D on profitability of high -tech industries with new evidence from the Iranian industries carrying four- digit codes. The Structure- Conduct- Performance (SCP) paradigm, which is relatively well known in industrial economics and in organization management, provides the theoretical construct that guides our empirical model formulation and execution. The data is compiled from observations made at the plantlevel covering all industrial plants employing ten or more persons and carrying four- digit codes within the time span of 1994-2007. The model used essentially consists of a simultaneous equation system framework grounded into a panel data approach and estimated by Two-Stage Least Squares (2SLS). Our findings indicate a positive and significant effect of R D expenditures, measured in intensive form, on profitability of high-tech industries as evidenced by the Iranian case. Our more notablefinding is the positive effect of lagged profits on R Dexpenditureintensity, revealing alikely mutually enforcing relationship between profitability and R D intensityin high tech industries.