Small Business Economics

, Volume 26, Issue 4, pp 365–376 | Cite as

The Impact of Perceived Expectations and Uncertainty on Firm Investment

  • Mark J. Koetse
  • Arno J. van der Vlist
  • Henri L. F. de Groot


This paper analyses the (differential) impact of perceived expectations and uncertainty on investment spending in small and large firms. We analyse two types of investment, viz. aggregate investment and investment in energy-saving technologies, using Dutch firm level data. The results show that expectations and uncertainty about input- and output prices and domestic demand have substantial but different effects on investment spending in firms of different sizes. Furthermore, we find evidence, at least for small firms, that there are important differences between the effects of uncertainty about input and output variables.


Output Variable Small Firm Large Firm Level Data Industrial Organization 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Abel, A.B. 1983‘Optimal Investment under Uncertainty’American Economic Review73228233Google Scholar
  2. Baker, W.H., Adams, H.L., Davis, B. 1993‘Business Planning in Successful Small Firms’Long Range Planning268288CrossRefGoogle Scholar
  3. Bell, G.K., Campa, J.M. 1997‘Irreversible Investments and Volatile Markets: A Study of the Chemical Processing Industry’Review of Economics and Statistics797987CrossRefGoogle Scholar
  4. Bo, H., 2001, Corporate Investment under Uncertainty in The Netherlands, PhD. Thesis Groningen, University of Groningen, Department of Economics.Google Scholar
  5. Butzen, F. and P. Vermeulen, 2002, ‘The Impact of Uncertainty on Investment Plans’, Working Paper No 24, Belgium, National Bank of Belgium.Google Scholar
  6. Caballero, R.J. 1991‘On the Sign of the Investment-Uncertainty Relationship’American Economic Review81279288Google Scholar
  7. Campa, J.M. 1994‘Multinational Investment under Uncertainty in the Chemical Processing Industries’Journal of International Business Studies25557578Google Scholar
  8. Carruth, A., Dickerson, A., Henley, A. 2000‘What Do we Know About Investment under Uncertainty’Journal of Economic Surveys14119153CrossRefGoogle Scholar
  9. Chenhall, R.H. 2003‘Management Control Systems Design within its Organizational Context: Findings from Contingency-Based Research and Directions for the Future’Accounting, Organizations and Society28127168CrossRefGoogle Scholar
  10. Ditillo, A. 2004‘Dealing with Uncertainty in Knowledge Intensive Firms: The Role of Management Control Systems as Knowledge Integration Mechanisms’Accounting, Organizations and Society29401421CrossRefGoogle Scholar
  11. Dixit, A.K., Pindyck, R.S. 1994Investment under UncertaintyPrinceton University PressPrincetonGoogle Scholar
  12. Driver, C., Moreton, D. 1991‘The Influence of Uncertainty on UK Manufacturing Investment’Economic Journal10114521459Google Scholar
  13. Drury, C., 2004, Management and Cost Accounting, 6th Edition, Thomson.Google Scholar
  14. Escudero, L.F., Galindo, E., Garcia, G., Gómez, E., Sabau, V. 1999‘Schumann, a Modelling Framework for Supply Chain Management under Uncertainty’European Journal of Operational Research1191434CrossRefGoogle Scholar
  15. Ferderer, J.P. 1993‘Does Uncertainty Affect Investment Spending?’Journal of Post Keynesian Economics161935Google Scholar
  16. Gelderen, M. van, M. Frese and R. Thurik, 2000, ‘Strategies, Uncertainty and Performance of Small Business Startups’, ERIM Report Series, ERS-2000-18-STR, Rotterdam, ERIM, Erasmus University.Google Scholar
  17. Ghosal, V., Loungani, P. 2000‘The Differential Impact of Uncertainty on Investment in Small and Large Businesses’Review of Economics and Statistics82338349CrossRefGoogle Scholar
  18. Groot, H.L.F., Verhoef, E.T., Nijkamp, P. 2001‘Energy Savings by Firms: Decision-Making, Barriers and Policies’Energy Economics23717740CrossRefGoogle Scholar
  19. Guiso, L., Parigi, G. 1999‘Investment and Demand Uncertainty’Quarterly Journal of Economics114185227CrossRefGoogle Scholar
  20. Hartman, R. 1972‘The Effects of Price and Cost Uncertainty on Investment’Journal of Economic Theory5358366CrossRefGoogle Scholar
  21. Hartmann, F.G.H. 2000‘The Appropriateness of RAPM: Toward the further Development of Theory’Accounting, Organizations and Society25451482CrossRefGoogle Scholar
  22. Huizinga, J. 1993‘Inflation Uncertainty, Relative Price Uncertainty, and Investment in U.S. Manufacturing’Journal of Money, Credit, and Banking25521557CrossRefGoogle Scholar
  23. Koetse, M. J., H. L. F. de Groot and R. J. G. M. Florax, 2005, ‘The Empirical Relationship between Investment and Uncertainty: A Meta-Analysis’, Tinbergen Institute Discussion Paper, Amsterdam, forthcoming.Google Scholar
  24. Lensink, R., P. van Steen and E. Sterken, 2000, ‘Is Size Important for the Investment-Uncertainty Relationship? An Empirical Analysis for Dutch Firms’, SOM research report - theme E, Groningen, University of Groningen.Google Scholar
  25. Matthews, C. H., 1991, ‘Planning Sophistication and Uncertainty: Assessing Financial Performance in Small and Entrepreneurial Firms’, paper presented at the 36th world conference of the International Council for Small Business, Vienna, Austria.Google Scholar
  26. Nakamura, T. 2002‘Finite Durability of Capital and the Investment-Uncertainty Relationship’Journal of Economic Behavior and Organization485156CrossRefGoogle Scholar
  27. Pattillo, C. 1998‘Investment, Uncertainty, and Irreversibility in Ghana’IMF Staff Papers45522553Google Scholar
  28. Peeters, M. 2001‘Does Demand and Price Uncertainty Affect Belgian and Spanish Corporate Investment?’Louvain Economic Review67119139Google Scholar
  29. Pindyck, R.S. 1982‘Adjustment Costs, Uncertainty, and the Behavior of the Firm’American Economic Review72415427Google Scholar
  30. Risseeuw, P.A., Masurel, E. 1994‘The Role of Planning in Small Firms: Empirical Evidence from a Service Industry’Small Business Economics6313322CrossRefGoogle Scholar
  31. Robinson, J.B.,Jr., Pearce, J.A.,II 1983‘The Impact of Formalized Strategic Planning on Financial Performance in Small Organizations’Strategic Management Journal4197207Google Scholar
  32. Shrader, C.B., Mulford, C.L., Blackburn, V.L. 1989‘Strategic and Operational Planning, Uncertainty, and Performance in Small Firms’Journal of Small Business Management274560Google Scholar
  33. Unni, V.K. 1981‘The Role of Strategic Planning in Small Business’Long Range Planning145458CrossRefGoogle Scholar
  34. Vicini, G. 1998‘How Italian Companies Deal with the Environment; the Results of a Survey’FEEM Newsletter21718Google Scholar

Copyright information

© Springer 2006

Authors and Affiliations

  • Mark J. Koetse
    • 1
  • Arno J. van der Vlist
    • 2
  • Henri L. F. de Groot
    • 1
  1. 1.Department of Spatial EconomicsFree University and Tinbergen InstituteAmsterdamThe Netherlands
  2. 2.Department of Business EconomicsWageningen UniversityWageningenThe Netherlands

Personalised recommendations