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Ambiguity attitude, R&D investments and economic growth.

Cozzi, G. and Giordani, P.E. (2011) 'Ambiguity attitude, R&D investments and economic growth.', Journal of evolutionary economics., 21 (2). pp. 303-319.


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., J Econ Theory 118:133–173, 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.

Item Type:Article
Keywords:Schumpeterian growth, R&D investments, Arrival rate of innovation, Ambiguity, Cultural attitude towards ambiguity.
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Record Created:12 May 2011 09:50
Last Modified:29 May 2012 16:36

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