Sy Syms School of Business (SSSB)

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Browsing Sy Syms School of Business (SSSB) by Subject "Ambiguity measurement"

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    Innovation under ambiguity and risk
    (SSRN, 2023) Ravid, S. Abraham (Avri); Coiculescu, Gabriela; Izhakian, Yehuda (Yud); 0000-0002-5557-789x
    We view innovation investments as real options and explore the implications of risk (volatility) as well as a newly defined outcome independent measure of ambiguity—Knightian uncertainty— for innovation decisions. The empirical analysis uses stock returns to compute an implementable measure of ambiguity. We also control for risk and other determinants of innovation. We find a consistently significant negative effect of ambiguity on R&D, patents, and citations, as predicted. The effect of risk on R&D is positive and significant, but the corresponding effect on patents and citations is negative and significant. Ambiguity matters more for high-tech firms, consistent with intuition.
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    Innovation under ambiguity and risk.
    (Baruch College Zicklin School of Business ; Social Science Research Network (SSRN), 2019-07-30) Coiculescu, Gabriela; Izhakian, Yehuda (Yud); Ravid, S. Abraham; 0000-0002-5557-789X
    We explore the implications of ambiguity (Knightian uncertainty) and risk for innovation decisions through the lens of real options. Our hypotheses are supported by a real options model, and are based on a new risk- and outcome-independent measure of ambiguity. We expect ambiguity to decrease innovation investment, whereas risk should increase innovation investment. The latter prediction is also consistent with prior work. Empirically, we find a consistently significant negative effect of ambiguity on R&D investment, as well as on patents and citations. We also find a significant positive effect of risk on R&D, but the effect of risk on patents and citations is negative and significant, which suggests that in the face of higher risk firms may wait and delay patenting. The effect of ambiguity is more important for high tech firms, which invest heavily in research and in patenting, consistent with our intuition.