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. Plant-level 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 plant-level R&D investment, productivity, physical investment, and turnover patterns observed in the data.

Hall Steven received his Ph.d in Economics in 2003. He is now working as professor at the university of Pennsylvania. He also received a B.S.C in philosophy in 2005.