R&D Uncertainty and Cycles
Nicolas Crouzet, Janice Eberly
https://www.aeaweb.org/webcasts/2026/intangible-capital
Some interesting ideas here re investment under uncertainty. Standard thinking is that uncertainty reduces investment. But for R&D style investment it can actually increase investment because the only way to learn about the potential value is to invest more and the uncertainty increases upside volatility. In traditional investment, the uncertainty comes from outside the system / project, and yes that does reduce investment, since that uncertainty / fluctuation in the value of the project is going to happen irrespective of what you do, so it’s better to just sit on your hands and delay investment until things stabilize. With R&D, the uncertainty is internal to the project itself.