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R&D profitability: the role of risk and Knightian uncertainty

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Abstract

This paper provides the first empirical attempt of linking firms profits and investment in R&D revisiting Knights (1921) distinction between uncertainty and risk. Along with the risky profit-maximizing scenario, identifying a second, off-setting, unpredictable bias that leads to heterogeneous returns to R&D investments is crucial to fully understand the drivers of corporate profits.

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  • Sara Amoroso & Pietro Moncada-Paterno-Castello & Antonio Vezzani, 2015. "R&D profitability: the role of risk and Knightian uncertainty," JRC Working Papers on Corporate R&D and Innovation 2015-01, Joint Research Centre.
    • Handle: RePEc:ipt:wpaper:201501
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    3. Sara Amoroso & Pietro Moncada-Paternò-Castello & Antonio Vezzani, 2017. "R&D profitability: the role of risk and Knightian uncertainty," Small Business Economics, Springer, vol. 48(2), pages 331-343, February.
    4. Annie Tubadji & Toby Denney & Don J. Webber, 2021. "Cultural relativity in consumers' rates of adoption of artificial intelligence," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1234-1251, July.
    5. Ghosal, Vivek & Ye, Yang, 2019. "The impact of uncertainty on the number of businesses," Journal of Economics and Business, Elsevier, vol. 105(C).
    6. Romeo-Victor Ionescu, 2016. "Research, Innovation and Development vs Regional Disparities across the European Union," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(2), pages 161-173, April.
    7. Pietro Moncada-Paternò-Castello, 2022. "Top R&D investors, structural change and the R&D growth performance of young and old firms," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(1), pages 1-33, March.
    8. CATTARUZZO Sebastiano, 2020. "On R&D sectoral intensities and convergence clubs," JRC Working Papers on Corporate R&D and Innovation 2020-01, Joint Research Centre.
    9. Vanja Grozdić & Branislav Marić & Mladen Radišić & Jarmila Šebestová & Marcin Lis, 2020. "Capital Investments and Manufacturing Firms’ Performance: Panel-Data Analysis," Sustainability, MDPI, vol. 12(4), pages 1-18, February.
    10. Antonelli, Cristiano & Orsatti, Gianluca & Pialli, Guido, 2023. "Out of Equilibrium and Intangible Assets," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202323, University of Turin.
    11. Mafini Dosso & Ben R Martin & Pietro Moncada-Paternò-Castello, 2018. "Towards evidence-based industrial research and innovation policy," Science and Public Policy, Oxford University Press, vol. 45(2), pages 143-150.
    12. Sara Amoroso, 2015. "Profits, R&D and labour: Breaking the law of diminishing returns to labour," JRC Working Papers on Corporate R&D and Innovation 2015-10, Joint Research Centre.
    13. Tubadji, Annie & Nijkamp, Peter & Santarelli, Enrico, 2017. "Shacklean Uncertainty and Cultural Embeddedness as Innovation Constraints in the UK," GLO Discussion Paper Series 111, Global Labor Organization (GLO).
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    More about this item

    Keywords

    Corporate R&D investment; firms operating profits; Knightian uncertainty; ambiguity.;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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