This paper investigates the effects of uncertainties over R&D policy and/or market demand on R&D levels in a duopoly with R&D rivalry and technological spillovers from a more advanced foreign firm. Within this framework, one "domestic" firm and one "foreign" firm compete on R&D and output. We find that, if firms' R&D are strategic complements, then firms' R&D decreases due to increased uncertainty over R&D policy but increases due to increased uncertainty over market demand. Thus, we conclude that different types of uncertainties exert different impacts on the decision of R&D investments.
