Paper presented at EconAnadolu 2009: Anadolu International Conference in Economics June 17-19, 2009, Eskişehir, Turkey 1 Determinants of R&D Decisions of Firms in Developing Countries the Case of Turkey Teoman Pamukçu ∗ Science and Technology Policies Research Centre, Middle East Technical University e-mail: pamukcu@metu.edu.tr Fatma Muazzez Utku-İsmihan Department of Science and Technology Policy Studies, Middle East Technical University e-mail: fmutku@yahoo.com Abstract Accessing and using technological knowledge and know-how is a bitter reality and a precondition for sustainable economic growth in Developing Countries (DCs). Developing a solid base for technology requires substantial amount of investment in research and development (R&D) and, unfortunately, most governments in DCs do not have sufficient financial resources to engage in R&D. Therefore, they must find ways to provide incentives to firms in an effort to increase their R&D expenditures. This, in turn, requires identification of factors that impact on R&D decisions of firms. This study will investigate sector and firm-level factors that influence R&D investment decisions of firms in the Turkish manufacturing industry. The relationship between a number of factors and R&D investment decisions of firms will be analyzed using a probit model and cross-sectional data for 5974 firms in the Turkish manufacturing sector in the year 1995. Given that only a handful studies investigate this issue for the Turkish economy, we expect findings of our econometric analysis to be valuable for the literature in DCs as well as for policy makers in DCs. Key Words: Research and Development, technology, performance, probit analysis, innovation, developing countries. JEL Codes: O30, C20 ∗ Correspondence: Science and Technology Policies Research Centre, Middle East Technical University,Ankara, e-mail: pamukcu@metu.edu.tr