Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/24705 
Year of Publication: 
2008
Series/Report no.: 
ZEW Discussion Papers No. 06-056 [rev.]
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Abstract: 
Real options investment theory predicts current investment falls as uncertainty about market returns increases. In the case of R&D investment, which is usually considered an irreversible form of investment, this effect should be quite pronounced. This paper tests the real options prediction about the R&D investment-uncertainty relationship and further considers how patent protection influences this relationship. Patent protection, by limiting the threat of market rivalry, should mitigate firm-specific uncertainty and stimulate current R&D investment. Our empirical results support both the prediction of real options theory and the mitigating effect of patent protection.
Subjects: 
Real Options Theory
Uncertainty
R&D
Intellectual Property Protection
Censored Regression
JEL: 
O31
O33
C25
older Version: 
Document Type: 
Working Paper

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