Patent Protection, Market Uncertainty, and R&D Investment

Arbeitspapier

Real options investment theory predicts current investment falls as uncertainty about market returns increases. In the case of R&D investment, which is usually considered an irreversible form of investment, this effect should be quite pronounced. This paper tests the real options prediction about the R&D investment-uncertainty relationship and further considers how patent protection influences this relationship. Patent protection, by limiting the threat of market rivalry, should mitigate firm-specific uncertainty and stimulate current R&D investment. Our empirical results support both the prediction of real options theory and the mitigating effect of patent protection.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 06-056 [rev.]

Classification and Topics

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

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Toole, Andrew A. ; Czarnitzki, Dirk
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/24705
• Last update: 10.03.202539, 11:43 AM CET