The paper presents a theoretical model of R&D (Research and Development) investment and extensively studies the expensing policy of the development-related costs. Basing itself on an analytical discussion as well as a study of the optimal rate of expensing, the paper shows that a firm's R&D investment policy and expensing-related costs are influenced by a set of variables; inter alia the stock market effects and corporate income tax rates. Interest rates, tax rates, marginal production costs, stock market indices and the speed of development benefits' revelation, would also alter the firm's disclosure and innovation policies conspicuously.
As we know, R&D (Research and Development), or innovation cost, is the cost of discovering new knowledge about products, processes and services. This knowledge could be applied to create new and improved products, processes and services that fulfil the market needs
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