The Park Place Economist


The purpose of this paper is to analyze whether or not investing more funds into research and development will lead to higher profitability, and the analysis will be done by examining the musculoskeletal division of the medical device industry. My research will tie in with production function theory as well as Schumpeter’s theory of creative destruction. This paper will also use past research to show what has been done to evaluate the positive relationship between research and development and risk and how this could alter profitability. Through theory and past research an appropriate testable hypothesis will be developed. In order to test the hypothesis, data will be drawn and used in regression analysis as well as descriptive statistics to verify a significant relationship. In order to perform regression analysis an empirical model will be made which will show the dependent variable and how it will be tested against an independent variable as well as control variables. A discussion of the results will then occur as well as mention of future research.