Uncertainty and the Dynamics of R&D

Nicholas Bloom

No 07-021, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: Uncertainty varies strongly over time, rising by 50% to 100% in recessions and by up to 200% after major economic and political shocks. This paper shows that higher uncertainty reduces the responsiveness of R&D to changes in business conditions - a "caution-effect" - making it more persistent over time. Thus, uncertainty will play a critical role in shaping the dynamics of R&D through the business cycle, and its response to technology policy. I also show that if fi?rms are increasing their level of R&D then the effect of uncertainty will be negative, while if fi?rms are reducing R&D then the effect of uncertainty will be positive.

Keywords: research and development; uncertainty; real options (search for similar items in EconPapers)
JEL-codes: E32 O30 (search for similar items in EconPapers)
Date: 2007-01
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Citations: View citations in EconPapers (139)

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Related works:
Journal Article: Uncertainty and the Dynamics of R&D (2007)
Working Paper: Uncertainty and the Dynamics of R&D (2007)
Working Paper: Uncertainty and the dynamics of R&D (2007)
Working Paper: Uncertainty and the Dynamics of R&D (2007)
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