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Research by Not-for-Profit Enterprises

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Abstract

This paper focuses on the research behavior of nonprofit firms. In particular, we model process innovation and compare equilibrium research spending under alternate objectives to outcomes under profit-maximization. Do profit-maximizing organizations spend more on research than nonprofit firms? We find that the nonprofit research spending exceeds the profit-maximizing levels. The ranking between nonprofit firms and the social optima, however, is less clear. Policy implications are discussed.

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