Business R&D and the Interplay of R&D Subsidies and Product Market Uncertainty

Business R&D and the Interplay of R&D Subsidies and Product Market Uncertainty 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Business R&D and the Interplay of R&D Subsidies and Product Market Uncertainty

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Publisher
Springer US
Copyright
Copyright © 2007 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-007-9152-x
Publisher site
See Article on Publisher Site

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.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Jan 4, 2008

References

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