Credit Constraints and the Cyclicality of R&D Investment: Evidence from France

40 Pages Posted: 22 Sep 2010

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Philippe Askenazy

IZA Institute of Labor Economics; Paris School of Economics (PSE)

Nicolas Berman

Graduate Institute of International and Development Studies (IHEID)

Gilbert Cette

Banque de France

Laurent Eymard

Bruegel

Date Written: February 2008

Abstract

We use a French firm-level panel data set over the period 1993-2004 to analyze the relationship between credit constraints and firms' R&D behavior over the business cycle. Our main results can be summarized as follows: (i) the share of R&D investment over total investment is countercyclical without credit constraints, but it becomes more procyclical as firms face tighter credit constraints; (ii) the result is magnified for firms in sectors that depend more heavily upon external finance; (iii) in more credit constrained firms, R&D investment share plummets during recessions but does not increase proportionally during upturns; (iv) average R&D investment and productivity growth are more negatively correlated with sales volatility in more credit constrained firms.

Keywords: Business cycles, R&D, Credit constraints, Volatility

JEL Classification: E22, E32, O16, O30, O32

Suggested Citation

Aghion, Philippe and Askenazy, Philippe and Berman, Nicolas and Cette, Gilbert and Eymard, Laurent, Credit Constraints and the Cyclicality of R&D Investment: Evidence from France (February 2008). Banque de France Working Paper No. 198. Available at SSRN: https://ssrn.com/abstract=1680324 or http://dx.doi.org/10.2139/ssrn.1680324

Philippe Aghion (Contact Author)

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Philippe Askenazy

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Nicolas Berman

Graduate Institute of International and Development Studies (IHEID) ( email )

PO Box 136
Geneva, CH-1211
Switzerland

Gilbert Cette

Banque de France ( email )

Paris
France

Laurent Eymard

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210
Belgium

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