Business Research Seminar: Does Research & Development Create or Resolve Uncertainty?
21 March 2014 - 21 March 2014
School of Business Research Seminar presents:
Wing Him Yeung, Beedie School of Business, Simon Fraser University
"In this paper, we empirically investigate two related questions on business Research & Development (R&D). First, does R&D create or resolve uncertainty? Second, does uncertainty encourage or discourage business R&D? Our testing is consistent with the hypothesis that R&D creates rather than resolves uncertainty. Why then do risk averse business managers undertake R&D? We argue that in creating uncertainty, R&D also creates “shadow options” for supplementary business investment not envisaged by business managers in the original objective for R&D. Rather, managers unexpectedly uncover shadow options in R&D’s inherent knowledge discovery process, which encourages business R&D in the first instance. Consistent with this real options interpretation, we report evidence that volatility encourages R&D."
University of the Fraser Valley
School of Business