Rates of Return for Industrial R&D in Chile

Using a panel data of innovative Chilean firms, we obtain a private return for R&D expenditure close to 30% during the nineties. Despite the fact of being almost twice the return obtained for physical capital - 17 %, results show that R&D expenditure causes contemporaneous negative impacts over firms’ profits suggesting that a learning process is in place. Nevertheless, after two years, the net effect is positive and may explain why private participation in research activities is still very low in Chile.