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The R&D Investment–Uncertainty Relationship: Do Strategic Rivalry and Firm Size Matter?†
Article first published online: 20 NOV 2012
Copyright © 2012 John Wiley & Sons, Ltd.
Managerial and Decision Economics
Volume 34, Issue 1, pages 15–28, January 2013
How to Cite
Czarnitzki, D. and Toole, A. A. (2013), The R&D Investment–Uncertainty Relationship: Do Strategic Rivalry and Firm Size Matter?. Manage. Decis. Econ., 34: 15–28. doi: 10.1002/mde.2570
- Issue published online: 12 DEC 2012
- Article first published online: 20 NOV 2012
This paper uses a real options perspective to augment a standard research and development (R&D) investment model and implement a firm-level empirical analysis to assess the practical significance of market uncertainty and its interactions with strategic rivalry and firm size. We use a measure of firm-relevant market uncertainty along with panel data and find that firms invest less in current R&D as uncertainty about market returns increases. The effect of firm-specific uncertainty on R&D investment is smaller in markets where strategic rivalry is likely to be more intense. Furthermore, holding access to financing constant, the effect of uncertainty on R&D investment is attenuated for large firms. Copyright © 2012 John Wiley & Sons, Ltd.