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Uncertainty, flexible labour relations and R&D expenditure

  • Marco Di Cintio
  • Emanuele Grassi

This paper examines the effects of uncertainty and flexible labour contracts on the Research and Development (R&D) expenditure. Using a panel of Italian manufacturing firms, we find a hump-shaped relationship between workforce flexibility and R&D outlays. 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.

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File URL: http://www.eeri.eu/documents/wp/EERI_RP_2013_13.pdf
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Paper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI RP 2013/13.

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Date of creation: 13 Dec 2013
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Handle: RePEc:eei:rpaper:eeri_rp_2013_13
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  1. Haibo Zhou & Ronald Dekker & Alfred Kleinknecht, 2011. "Flexible labor and innovation performance: evidence from longitudinal firm-level data," Industrial and Corporate Change, Oxford University Press, vol. 20(3), pages 941-968, June.
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  8. Saint-Paul, G., 1995. "Employment Protection, International Specialization, and Innovation," DELTA Working Papers 95-31, DELTA (Ecole normale supérieure).
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  11. Dolado, Juan J. & Garcia-Serrano, Carlos & Jimeno, Juan F, 2001. "Drawing Lessons From the Boom of Temporary Jobs in Spain," CEPR Discussion Papers 2884, C.E.P.R. Discussion Papers.
  12. Dirk Czarnitzki & Andrew Toole, 2007. "Business R&D and the Interplay of R&D Subsidies and Product Market Uncertainty," Review of Industrial Organization, Springer, vol. 31(3), pages 169-181, November.
  13. Roberto M. Samaniego, 2006. "Employment Protection and High-Tech Aversion," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 224-241, April.
  14. Spyros Arvanitis, 2005. "Modes of labor flexibility at firm level: Are there any implications for performance and innovation? Evidence for the Swiss economy," Industrial and Corporate Change, Oxford University Press, vol. 14(6), pages 993-1016, December.
  15. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  16. Alan Carruth & Andy Dickerson & Andrew Henley, 1998. "What Do We Know About Investment Under Uncertainty?," Studies in Economics 9804, School of Economics, University of Kent.
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  18. Barbosa, Natália & Faria, Ana Paula, 2011. "Innovation across Europe: How important are institutional differences?," Research Policy, Elsevier, vol. 40(9), pages 1157-1169.
  19. Episcopos, Athanasios, 1995. "Evidence on the relationship between uncertainty and irreversible investment," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(1), pages 41-52.
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  22. Ulph, Alistair & Ulph, David, 1998. "Labour markets, bargaining and innovation," European Economic Review, Elsevier, vol. 42(3-5), pages 931-939, May.
  23. Bulan, Laarni T., 2005. "Real options, irreversible investment and firm uncertainty: New evidence from U.S. firms," Review of Financial Economics, Elsevier, vol. 14(3-4), pages 255-279.
  24. Goel, Rajeev K. & Ram, Rati, 2001. "Irreversibility of R&D investment and the adverse effect of uncertainty: Evidence from the OECD countries," Economics Letters, Elsevier, vol. 71(2), pages 287-291, May.
  25. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May.
  26. Alfred Kleinknecht & Remco Oostendorp & Menno Pradhan & C. W. M. Naastepad, 2006. "Flexible Labour, Firm Performance and the Dutch Job Creation Miracle," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(2), pages 171-187.
  27. Amaia Altuzarra & Felipe Serrano, 2010. "Firms’ Innovation Activity and Numerical Flexibility," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(2), pages 327-339, January.
  28. Annamaria Nese & Niall O’Higgins, 2007. "Attrition bias in the Capitalia panel," International Review of Economics, Springer, vol. 54(3), pages 383-403, September.
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