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Credit constraints and the cyclicality of R&D investment: Evidence from France

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  • Philippe Aghion

    (Department of Economics, Harvard University - (-), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Philippe Askenazy

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, IZA - Institute for the Study of Labor - IZA, Centre de recherche de la Banque de France - Banque de France, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales [EHESS] - Ecole des Ponts ParisTech - Ecole normale supérieure de Paris - ENS Paris)

  • Nicolas Berman

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, IZA - Institute for the Study of Labor - IZA, Centre de recherche de la Banque de France - Banque de France)

  • Gilbert Cette

    (Centre de recherche de la Banque de France - Banque de France, Université de la Méditerranée - Aix-Marseille 2 - Université de la Méditerranée - Aix-Marseille II)

  • Laurent Eymard

    (Centre de recherche de la Banque de France - Banque de France)

Abstract

We use a French firm-level data set containing 13,000 firms 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 less countercyclical as firms face tighter credit constraints; (ii) this result is magnified for firms in sectors that depend more heavily upon external finance, or that are characterized by a low degree of asset tangibility ; (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.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00586744.

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Date of creation: Apr 2008
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Handle: RePEc:hal:psewpa:halshs-00586744

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00586744
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Keywords: business cycles ; R&D ; credit constraints ; volatility;

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