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Patent protection, market uncertainty, and R&D investment

Author

Listed:
  • Czarnitzki, Dirk
  • Toole, Andrew A.
Abstract
The real options investment theory shows that greater uncertainty about market revenues reduces current R&D investment by increasing the value of waiting. This paper presents empirical evidence that patent protection mitigates the effect market uncertainty on R&D investment.

Suggested Citation

  • Czarnitzki, Dirk & Toole, Andrew A., 2006. "Patent protection, market uncertainty, and R&D investment," ZEW Discussion Papers 06-056, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:5450
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    References listed on IDEAS

    as
    1. Pindyck, Robert S., 1993. "Investments of uncertain cost," Journal of Financial Economics, Elsevier, vol. 34(1), pages 53-76, August.
    2. Zvi Griliches, 1998. "Productivity and R&D at the Firm Level," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 100-133, National Bureau of Economic Research, Inc.
    3. Arora, Ashish & Ceccagnoli, Marco & Cohen, Wesley M., 2008. "R&D and the patent premium," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1153-1179, September.
    4. Zvi Griliches, 1984. "R&D, Patents, and Productivity," NBER Books, National Bureau of Economic Research, Inc, number gril84-1.
    5. Wesley M. Cohen, 2005. "Patents and Appropriation: Concerns and Evidence-super-1," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 57-71, January.
    6. Goel, Rajeev K. & Ram, Rati, 2001. "Irreversibility of R&D investment and the adverse effect of uncertainty: Evidence from the OECD countries," Economics Letters, Elsevier, vol. 71(2), pages 287-291, May.
    7. Helen Weeds, 2002. "Strategic Delay in a Real Options Model of R&D Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 729-747.
    8. Nick Bloom & Stephen Bond & John Van Reenen, 2007. "Uncertainty and Investment Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(2), pages 391-415.
    9. Alan Carruth & Andy Dickerson & Andrew Henley, 2000. "What do We Know About Investment Under Uncertainty?," Journal of Economic Surveys, Wiley Blackwell, vol. 14(2), pages 119-154, April.
    10. Collins, Norman R & Preston, Lee E, 1969. "Price-Cost Margins and Industry Structure," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 271-286, August.
    11. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    12. Pakes, Ariel S, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," Econometrica, Econometric Society, vol. 54(4), pages 755-784, July.
    13. repec:adr:anecst:y:1998:i:49-50:p:16 is not listed on IDEAS
    14. Robert Lensink & Hong Bo & Elmer Sterken, 2001. "Investment, Capital Market Imperfections, and Uncertainty," Books, Edward Elgar Publishing, number 1770.
    15. Sunil Kanwar & Robert Evenson, 2003. "Does intellectual property protection spur technological change?," Oxford Economic Papers, Oxford University Press, vol. 55(2), pages 235-264, April.
    16. Bronwyn H. Hall, 1990. "The Manufacturing Sector Master File: 1959-1987," NBER Working Papers 3366, National Bureau of Economic Research, Inc.
    17. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 64-83, February.
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    19. Derek Bosworth & Elizabeth Webster (ed.), 2006. "The Management of Intellectual Property," Books, Edward Elgar Publishing, volume 0, number 3649.
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    24. repec:bla:jecsur:v:14:y:2000:i:2:p:119-53 is not listed on IDEAS
    25. Wesley M. Cohen, 2005. "Patents and Appropriation: Concerns and Evidence," Springer Books, in: Albert N. Link & F. M. Scherer (ed.), Essays in Honor of Edwin Mansfield, pages 217-231, Springer.
    26. Dietmar Harhoff, 1998. "Are there Financing Constraints for R&D and Investment in German Manufacturing Firms," Annals of Economics and Statistics, GENES, issue 49-50, pages 421-456.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Real Options Theory; Uncertainty; R&D; Intellectual Property Protection; Censored Regression;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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