Business R&D and the Interplay of R&D Subsidies and Market Uncertainty

Arbeitspapier

The literature suggests that public research and development (R&D) subsidies may reduce market failures affecting private R&D investment caused by incomplete appropriability of knowledge and financial constraints due capital market imperfections. Drawing on the theory of investment under uncertainty, this paper argues that public R&D subsidies increase business R&D investment through an additional mechanism – mitigating the effects of market uncertainty on R&D investment in markets for new products. Using a sample of German manufacturing firms, we show that market uncertainty indeed reduces R&D investment, and that R&D subsidies mitigate the effect of uncertainty. Our findings suggest that public policies aimed at increasing business R&D investment can achieve this objective by reducing the degree of uncertainty in the demand for innovative products.

Objekt anzeigen

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ZEW Discussion Papers ; No. 06-055

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Single Equation Models; Single Variables: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities ; Innovation and Invention: Processes and Incentives ; Technological Change: Choices and Consequences; Diffusion Processes
• Thema: Real Options Theory ; Uncertainty ; R&D ; Censored Regression

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Czarnitzki, Dirk ; Toole, Andrew A.
• Ereignis: Veröffentlichung
• (wer): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (wo): Mannheim
• (wann): 2006

Weitere Informationen

• Handle: http://hdl.handle.net/10419/24510