Research productivity depends on the ability to discern whether an idea is promising, and a willingness to abandon the ones that are not. Economists know little about this process, however, because empirical studies of innovation typically begin with a sample of issued patents or published...

We use a change in Canadian tax law to examine how small private firms respond to the R&D tax credit. Our estimates imply an R&D user-cost elasticity above unity. Contract R&D expenditures are more elastic than the R&D wage bill. Firms that perform contract research or recently invested in R&D...

We study a dynamic model of the decision to continue or abandon a research project. Researchers improve their ideas over time and also learn whether those ideas will be adopted by the scientific community. Projects are abandoned as researchers grow more pessimistic about their chance of success....