R&D investment under incomplete markets

Fan Hu and Yaoyao Wu

Managerial and Decision Economics, 2023, vol. 44, issue 2, 858-861

Abstract: Entrepreneurs often face undiversifiable idiosyncratic risks from their R&D investments. We extend the real options model of R&D to an incomplete markets environment. We find the effect of market incompleteness on R&D investment is ambiguous. With low technological uncertainty, the agent under incomplete markets over‐investment in R&D. However, market incompleteness leads to under‐investment in R&D when the technological uncertainty is high.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/mde.3717

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:44:y:2023:i:2:p:858-861

Access Statistics for this article

Managerial and Decision Economics is currently edited by Antony Dnes

More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().