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 α-MEU decision rule (Ghirardato et al., 2004). Along the balanced growth path, the higher the agent's ambiguity aversion (α), 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.

Ambiguity Attitude, R&D Investments and Economic Growth / Giordani, Paolo; Guido, Cozzi. - In: JOURNAL OF EVOLUTIONARY ECONOMICS. - ISSN 0936-9937. - 21:2(2011), pp. 303-319. [10.1007/s00191-010-0217-x]

Ambiguity Attitude, R&D Investments and Economic Growth

GIORDANI, PAOLO;
2011

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 α-MEU decision rule (Ghirardato et al., 2004). Along the balanced growth path, the higher the agent's ambiguity aversion (α), 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.
Schumpeterian growth; R&D investments; arrival rate of innovation; ambiguity; cultural attitude towards ambiguity.
Ambiguity Attitude, R&D Investments and Economic Growth / Giordani, Paolo; Guido, Cozzi. - In: JOURNAL OF EVOLUTIONARY ECONOMICS. - ISSN 0936-9937. - 21:2(2011), pp. 303-319. [10.1007/s00191-010-0217-x]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11385/7145
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