Lach and Schankerman (1989)

Lach, Saul, and Mark Schankerman. "Dynamics of R&D and Investment in the Scientific Sector." Journal of Political Economy, August 1989.

From the author’s abstract: “This paper empirically explores the dynamic interactions among research and development, capital investment, and the stock market performance of 191 firms in science-based industries during the period 1973-81… The data indicate that R & D Granger-causes investment but that investment does not Granger-cause R & D. We discuss interpretations of this causal ordering, characterize the stylized facts of the movements over time of R & D and investment, and measure the stock market valuation of these movements.”

LK comment: There is a broad literature on the effects of R&D investment on corporate financial performance and stock returns. This is important for ESG investors because many studies studies - published and unpublished - suggest that R&D intensive organizations have above-average corporate social responsibility practices. e.g., Microsoft might have better employee relations than a coal mining. So in many settings it is useful, even critical, to include R&D as a control variable in study design.

Link: https://www.journals.uchicago.edu/doi/abs/10.1086/261632