Business Cycles and Investment in Intangibles: Evidence from Spanish Firms

42 Pages Posted: 22 May 2012

See all articles by Paloma Lopez-Garcia

Paloma Lopez-Garcia

European Central Bank (ECB)

Jose Manuel Montero

Banco de España

Enrique Moral-Benito

Banco de España; Universidad Carlos III de Madrid

Date Written: May 22, 2012


This paper tests the opportunity-cost theory using a panel of Spanish firms during the period 1991-2010. Under this theory, productivity-enhancing activities, such as R&D investment, should increase during downturns because of the fall in their relative cost – in terms of forgone output. This would imply that business cycles may have a (positive) long-term impact on productivity growth. In the spirit of Aghion, et al. (2007) we allow the impact of the cycle on R&D to vary between firms with different access to credit, finding that credit constraints may reverse the countercyclicality of R&D, even if it is optimal for them. We go one step further and explore whether other productivity-enhancing activities, like on-the-job training and the purchase of patents, follow a similar pattern. We find that on-the-job training expenditures are countercyclical and, unlike R&D investment, credit constraints seem not to affect their cyclical behavior. Investments in other intangibles, such as patent purchases, are found to be acyclical, also irrespective of financial constraints, which could suggest some kind of substitution between R&D and patent purchases over the cycle. Finally, complementarities between the different intangible investments and the traditional productive factors (labor and capital) are also investigated via production function estimates, in order to assess potential indirect effects of the cycle on long-run growth.

Keywords: R&D, business cycle, credit constraints, panel data

JEL Classification: O3, E32, D22, C23

Suggested Citation

Lopez-Garcia, Paloma and Montero, Jose Manuel and Moral-Benito, Enrique, Business Cycles and Investment in Intangibles: Evidence from Spanish Firms (May 22, 2012). Banco de Espana Working Paper No. 1219, Available at SSRN: or

Paloma Lopez-Garcia (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Jose Manuel Montero

Banco de España ( email )

Madrid 28014

Enrique Moral-Benito

Banco de España ( email )

Alcala 50
Madrid 28014

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903

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