Determinants of Research and Development Activity by Electric Utilities: Comment

This comment examines a model of the determinants of electric utility R&D activity postulated by Wilder and Stansell. One of the defects in their empirical analysis is the failure to account for corporate interrelationships among the sample observations. Wilder and Stansell include as separate and independent observations joint venture companies, operating systems of holding companies, and subsidiaries of nonutility parent companies. After adjusting the original sample for these corporate affiliations, we estimated the Wilder and Stansell model for 1970 and 1972. Our empirical results do not support the Wilder and Stansell conclusion regarding the impact of current profitability on current research and development activity. We find that the sign and significance of the profitability measure are sensitive to the composition of the sample and to the particular time frame.