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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) - École des Ponts ParisTech (ENPC) - École normale supérieure [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 Working Papers with number halshs-00586744.

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

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00586744
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Related research

Keywords: business cycles ; R&D ; credit constraints ; volatility;

References

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  1. Benoit Mulkay & Bronwyn H. Hall & Jacques Mairesse, 2000. "Firm Level Investment and R&D in France and the United States: A Comparison," NBER Working Papers 8038, National Bureau of Economic Research, Inc.
  2. repec:fth:harver:1473 is not listed on IDEAS
  3. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
  4. Bean, Charles R., 1990. "Endogenous growth and the procyclical behaviour of productivity," European Economic Review, Elsevier, vol. 34(2-3), pages 355-363, May.
  5. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
  6. Zvi Griliches, 1991. "Patent Statistics as Economic Indicators: A Survey," NBER Working Papers 3301, National Bureau of Economic Research, Inc.
  7. Robert E. Hall, 1991. "Labor Demand, Labor Supply, and Employment Volatility," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 17-62 National Bureau of Economic Research, Inc.
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Cited by:
  1. Keith E. Maskus & Rebecca Neumann & Tobias Seidel, 2011. "How National and International Financial Development Affect Industrial R&D," CESifo Working Paper Series 3480, CESifo Group Munich.
  2. Stefano Giglio & Tiago Severo, 2011. "Intangible Capital, Relative Asset Shortages and Bubbles," Levine's Working Paper Archive 786969000000000121, David K. Levine.

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