R&D and Firm Resilience During Bad Times

61 Pages Posted: 18 Nov 2020

See all articles by Apoorva Gupta

Apoorva Gupta

Düsseldorf Institute for Competition Economics

Date Written: October 1, 2020


Can being innovative help firms to shield themselves from the disruptive effects of a recession? Using data for Spanish manufacturing firms, this paper finds that innovative firms suffered considerably less compared to non- innovative firms during the Great Recession. The operating mechanism for the resilience of innovative firms to market disruption during a recession is product differentiation, and not reduction in marginal cost of production and prices with process innovation. The data does not support alternative explanations such as better access to capital, or difference in labour moving costs for innovative firms. The results provide evidence for the role of innovation in making firms dynamically capable and resilient to large negative shocks.

Keywords: Innovation, Recession, Resilience, Product Differentiation, Dynamic Capability

JEL Classification: L25, O30, O31, E32

Suggested Citation

Gupta, Apoorva, R&D and Firm Resilience During Bad Times (October 1, 2020). Available at SSRN: https://ssrn.com/abstract=3703103 or http://dx.doi.org/10.2139/ssrn.3703103

Apoorva Gupta (Contact Author)

Düsseldorf Institute for Competition Economics ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225

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