The Social Dimension of Behaviour: Macroeconomic Uncertainty and Firms? Investment in R&D and in Machinery in Argentina

ARZA, V

Learning, Capability Building and Innovation for Development

Palgrave MacMillan

Año: 2013; p. 176 - 201

Based on experimental psychology (Edwards, 1968; Ross and Anderson, 1982; Tversky and Kahneman, 1973, 1982), this chapter argues that actors do not form rational expectations, but decide their future plans through judgement based on inductive reasoning. It is claimed here that the social context feeds into that induction process. In other words, the macroeconomic environment shapes microeconomic decisions through the historical configuration of the institutional setting, which drives common interpretation of incentives/disincentives that emanate from the economic system. For example, the successive switches of economic regimes in Argentina (Arza, 2009) not only added to the lack of confidence in the permanence of economic reforms, but also created systematic patterns of individual behaviour that hedged against change and were embedded in day-to-day practices. These patterns involved generalized tendencies towards short-termism and defensive strategies, and this was abundantly reported in the literature (e.g. Bonvecchi and Porta, 2003; Chudnovsky, 2001; Fanelli, 2002; Katz, 2000; Kosacoff, 2000). However, there are different investment decisions with dissimilar determinants. The relevant facts to be forecast, and how far away the relevant future is, differ with the nature of investment. Thus, the impacts of macroeconomic uncertainty on, say, investment in the stock exchange, machinery and in R&D would not be the same. In the stock exchange market it is possible to revise expectations in the short term. In contrast, the decision to invest in fixed technological assets, which, despite the existence of second-hand markets, are relatively illiquid, requires the ability to forecast their rate of return over their entire life cycle. If the situation is deemed not to be favourable, the purchase of a machine can be postponed, relying meanwhile on output stretching strategies. In turn, investment in R&D shows long maturity and, in contrast to fixed assets, needs persistent behaviour; since previous knowledge accumulation will have a positive feedback on the effectiveness of current learning. This chapter will analyse firms? investment behaviour in reaction to macroeconomic uncertainty for two types of investment decisions: investment in machinery and inR&D. This is also inspired by Katz?s (1984, 1987) distinction between choosing technological artefacts and search and learning activities