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Title:Patent Protection, Market Uncertainty, and R&D Investment PDF Logo
Authors:Toole, Andrew A.
Czarnitzki, Dirk
Issue Date:2008
Series/Report no.:ZEW Discussion Papers 06-056 [rev.]
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:http://hdl.handle.net/10419/24511
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

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