On robust asymmetric equilibria in asymmetric R&D-driven growth economies

Abstract

In an R&D-driven growth model with asymmetric fundamentals the steady state equilibrium R&D investments are industry-speci…c and they are such that R&D returns are equalized across industries. Return equalization, however, makes investors indi¤erent as to where to target research and, hence, the problem of allocation of R&D investments across industries is indeterminate. Agents' indi¤erence creates an ambiguous investment scenario. We assume that agents hold "ambiguous" beliefs on the per-industry pro…tability of their R&D investments. Investors'aversion towards ambiguity (in the sense of Gilboa-Schmeidler, 1989) eliminates the indeterminacy of the R&D investment problem. In particular, we prove that the asymmetric return-equalizing equilibrium is robust against a however small degree of investors'aversion to ambiguity.

Effects of culture on firm risk-taking: a cross-country and cross-industry analysis

“…This observation is consistent with the idea that growth has an inherent risk component to it, and suggests that the lower a country"s ambiguity aversion, the more business ventures it will pursue and thus, the higher its economic development. In fact, this hypothesis is verified by the modeling work of Giordani and Zamparelli (2011), who show that the lower the ambiguity aversion, the higher the R&D efforts, and ceteris paribus, the higher the economic performance. Our sense is that firms in countries low is uncertainty-aversion will benefit from the upside risky effects of their risky financial actions in periods of economic upswing and rapid development, whereas in periods of economic downturn they are likely to run into problems when confronted with the downside risky consequences of their actions.…”

The influence of Ghana's national culture on latent entrepreneurs: An application of Social Rule System Theory

“…Corporate risktaking is higher in societies with low uncertainty avoidance than countries with high uncertainty avoidance (Roxana, 2012). The supposition is verified by the modeling work of Giordani & Zamparelli (2011), who posited that, the lower the ambiguity aversion, the higher the Research & Development efforts and vice versa. Correspondingly, it is expected that, high uncertainty avoidancecultures are less likely tobe latententrepreneurs.…”

Market dominance, R&D grant funding, and innovation outcomes

“…Information asymmetry, which refers to the situation where one party in an economic transaction has more information or knowledge about the products than the other, is recognized as a common market failure in innovation policy. In this case, it is related to the issue that the fund providers (such as banks or investors) are not provided with enough information about the R&D projects, which are normally associated with high risk and uncertainty (Hall, 2002; Hall and Lerner, 2010; Giordani and Zamparelli, 2011; Haapanen et al, 2014). And, even when provided with information, R&D investment has uncertain outcomes.…”