This study examines the relationship between R&D expenditures and product‐market, process‐cost, and technological innovation/disruption‐related uncertainties. For this purpose, the product‐market, process‐cost, and technological innovation related uncertainties are linked to earnings component volatilities. Specifically, product‐market uncertainty is measured by future sales volatility; process‐cost uncertainty by future cost of sales volatility; and technological innovation uncertainty by future special items volatility. The results show that the associations between R&D expenditures and future sales and cost of sales volatilities are lower than those of capital expenditures. However, the association between R&D expenditures and future special items volatility is higher than that of capital expenditures. Collectively, these findings provide insights into the debate on capitalizing versus expensing R&D expenditures.
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