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This paper examines the effect of peers on a firm's research and development (R&D) policy. We show that firms do not make R&D decisions in isolation, and that industry dynamics play an important role in defining a firm's R&D intensity. Using a large sample of 54,393 firm‐year observations from 1991 to 2015 in the United States, we find that firms' R&D decisions are mainly driven by...
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