Business R&;D and the Interplay of R&;D Subsidies and Product Market Uncertainty |
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| Authors: | Dirk Czarnitzki Andrew A Toole |
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| Institution: | (1) Department of Managerial Economics, Strategy and Innovation, K.U. Leuven, Naamsestraat 69, 3000 Leuven, Belgium;(2) ZEW, Mannheim, Germany;(3) Department of Agriculture, Food and Resource Economics, Rutgers University, 55 Dudley Road, New Brunswick, NJ 08901, USA |
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| Abstract: | This paper examines the effect of product market uncertainty and government research and development (R&D) subsidies on firm-level
R&D investment. Using a sample of German manufacturing firms, we find that product market uncertainty reduces R&D investment
and government R&D subsidies increase R&D investment. Moreover, our results indicate that R&D subsidies mitigate the effect
of product market uncertainty on R&D investment. These findings suggest that public policies aimed at increasing business
R&D investment can achieve this objective by reducing the degree of uncertainty in the product market.
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| Keywords: | R& D Real options theory Uncertainty |
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