Credit Constraints and the Cyclicality of R&D Investment: Evidence from France
40 Pages Posted: 22 Sep 2010
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: Suggested Citation
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