Uncertainty,Flexible Labour Relations and R&D

This paper examines the effects of uncertainty and flexible labour contracts on the Research and Development (R&D) intensity. Using a panel of Italian manufacturing firms, we find a hump‐shaped relationship between workforce flexibility and R&D intensity. Moreover, as predicted by the real options theory, our results suggest that product market uncertainty reduces R&D efforts and that flexible labour contracts countervail the adverse effect of uncertainty on R&D.