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This paper develops and estimates a structural model of R&D investment and productivity evolution of manufacturing plants in the Korean electric motor industry from 1991 to 1996. Plantlevel decisions for R&D investment, physical capital investment, entry, and exit are developed using a dynamic industry evolution model. Estimates of the structural parameters are used to quantify how a plant?s productivity is affected by its own R&D and by spillovers from the R&D of its competitors. In contrast to previous R&D studies, which usually investigate a collection of producers from various industries, this paper characterizes how the full set of dynamic decisions by each plant in a single industry interact with its own and its competitor?s productivity change. This allows the model to provide a detailed set of pathways connecting the plantlevel R&D investment, productivity, physical investment, and turnover patterns observed in the data.
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