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The effects of uncertainties over R&D policy or market demand on R&D levels

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  • Chao‐Cheng Mai
  • Shih‐Chuan Lin

Abstract

This paper investigates how product market uncertainty and government research and development (R&D) subsidy uncertainty affect R&D levels in a duopoly with R&D rivalry and technological spillovers from an advanced large firm. Within this framework, one small firm and one large firm compete on R&D and output. We find that if firms' R&D efforts are strategic complements, then the firms' R&D outputs would decrease due to increased uncertainty over R&D policy but would increase due to increased uncertainty over market demand. Thus, we conclude that different types of uncertainties exert different impacts on R&D investment decisions.

Suggested Citation

  • Chao‐Cheng Mai & Shih‐Chuan Lin, 2021. "The effects of uncertainties over R&D policy or market demand on R&D levels," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(4), pages 1048-1056, June.
    • Handle: RePEc:wly:mgtdec:v:42:y:2021:i:4:p:1048-1056
    DOI: 10.1002/mde.3291
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