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Uncertainty, flexible labour relations and R&D expenditure

Grassi, Emanuele and Di Cintio, Marco (2012): Uncertainty, flexible labour relations and R&D expenditure.

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Abstract

This paper examines the effects of uncertainty and flexible labour contracts on the Research and Development (R&D) expenditure. Using a panel of Italian manufacturing firms, we find a hump-shaped relationship between workforce flexibility and R&D outlays. Moreover, as predicted by the real options theory, our results suggest that product market uncertainty reduces R&D efforts and that flexible labour contracts countervail the adverse effect of uncertainty on R&D.

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