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Uncertainty and the Dynamics of R&D Author info | Abstract | Publisher info | Download info | Related research | Statistics Nick Bloom
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Uncertainty varies strongly over time, rising by 50% to 100% in recessions and by up to200% after major economic and political shocks. This paper shows that higher uncertaintyreduces 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 thedynamics of R&D through the business cycle, and its response to technology policy. I alsoshow that if firms are increasing their level of R&D then the effect of uncertainty will benegative, while if firms are reducing R&D then the effect of uncertainty will be positive.
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number
dp0792.
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Date of creation: May 2007Date of revision:
Handle: RePEc:cep:cepdps:dp0792Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
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Keywords: R&D ; uncertainty ; real options ; Other versions of this item:
Find related papers by JEL classification: D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing D8 - Microeconomics - - Information, Knowledge, and Uncertainty O3 - Economic Development, Technological Change, and Growth - - Technological Change
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