Ambiguity attitude, R&D investments and economic growth
Journal
Journal of Evolutionary Economics
ISSN
0936-9937
ISSN-Digital
1432-1386
Type
journal article
Date Issued
2011-05
Author(s)
Abstract
The process aimed at discovering new ideas is an economic activity the returns from which are intrinsically uncertain. We extend the neo-Schumpeterian growth framework to investigate the role of strong uncertainty in the innovative process. In particular, we postulate that, when deciding upon R&D efforts, investors hold ‘ambiguous beliefs' about the exact probability of arrival of the next vertical innovation, and that they face ambiguity via the ???MEU decision rule (Ghirardato et al., J Econ Theory 118:133-173, 2004). Along the balanced growth path, the higher the agent's ambiguity aversion (?), the lower the R&D efforts and the economic performance. Consistent with cross-country empirical evidence, this causal mechanism suggests that, together with the profitability conditions of the economy, different ‘cultural' attitudes towards ambiguity may help explain the different R&D efforts observed across countries.
Language
English
Keywords
Schumpeterian growth
R&D investments
arrival rate of innovation
ambiguity
cultural attitude towards ambiguity
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
Yes
Publisher
Springer
Publisher place
Heidelberg
Volume
21
Number
2
Start page
303
End page
319
Pages
17
Subject(s)
Eprints ID
222058