R&D Uncertainty and Cycles

Key Points

• This research aims to explore the contrasting responses of R&D investment and GDP investment to economic uncertainty, especially during recessions.
• Analyzed the cyclic nature of GDP and R&D investments during economic fluctuations.
• Examined the impact of uncertainty on R&D investments, particularly during the COVID-19 recession.
• Discussed how real options theory relates to investment decisions under uncertainty.
• R&D investment shows a positive response to heightened uncertainty, unlike GDP investment, which is more cyclical.
• During COVID-19, R&D investment increased, demonstrating its unique nature in recessionary periods.
• Findings highlight the distinction in how real options manifest in R&D versus other investments.

Abstract