Economic policy uncertainty, R&D expenditures and innovation outputs

Abstract

Purpose The purpose of this study is to examine the relationship between the news-based economic policy uncertainty (EPU), research and development (R&D) expenditures per capita and innovation outputs. Design/methodology/approach Data from 1996 to 2015 for 19 countries (Australia, Brazil, Canada, Chile, China, France, Germany, India, Ireland, Italy, Japan, Netherlands, Russia, Singapore, South Korea, Spain, Sweden, the United Kingdom and the United States) are used. The authors apply country and year fixed-effects models for the estimations. Findings The study findings show that higher levels of EPU are positively associated with higher R&D expenditures per capita as well as innovation outputs (patent applications, patent grants and trademark applications). Practical implications This study deepens our understanding on the policy uncertainty-economic activities nexus and expands the literature on uncertainty, which is still at an initial phase of development, leading to generate a variety of open research questions for further investigation and study (Bloom, 2014). Originality/value There has not been an empirical investigation on the links between EPU and R&D expenditures and innovation outputs across several countries. The authors address this gap in the literature.