Financial Constraints and the Cyclicality of R&D Investment:Evidence from Slovenia
AbstractThis paper uses firm level data to show how R&D investment responds to shocks in sales growth in credit constrained firms. A credit constrained firm has to rely on its cash flow and borrowing capacity to survive its short-run liquidity shock when hit by a negative shock. This reduces the possibility for further borrowing in order to invest in non-tangible long term R&D, hence a negative shock should hit R&D investments more in firms that are more credit constrained. We find that in financially constrained firms sales growth is positively associated with R&D investment, suggesting procyclical behavior of R&D investment in credit constrained firms. In contrast, we find that in firms with no financial constraints R&D investment is negatively correlated with sales growth, suggesting countercyclical behavior of R&D, consistent with the Schumpeterian idea of restructuring. Furthermore, we find that the firm level response in R&D investment to sales growth is stronger in firms that are more financially dependent, such as firms that are no part of a multinational, firms not receiving subsidies or firms with less collateral.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 23909.
Date of creation: 2009
Date of revision:
Contact details of provider:
Postal: De Bériotstraat 34, B-3000 Leuven
Phone: +32 (0) 16 / 32 6598
Fax: +32 (0) 16 / 32 6599
Web page: http://www.econ.kuleuven.be/licos
More information through EDIRC
R& D investment; financial constraints; cyclicality;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-11 (All new papers)
- NEP-INO-2009-07-11 (Innovation)
- NEP-MIC-2009-07-11 (Microeconomics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Paloma López-García & José Manuel Montero & Enrique Moral-Benito, 2012. "Business cycles and investment in intangibles: evidence from Spanish firms," Banco de Espaï¿½a Working Papers 1219, Banco de Espa�a.
- Masino, Serena, 2012. "Macroeconomic instability and the incentive to innovate," MPRA Paper 38766, University Library of Munich, Germany.
- Masino, Serena, 2012. "Macroeconomic instability and the incentive to innovate," MPRA Paper 38830, University Library of Munich, Germany.
- Serena Masino, 2012. "Macroeconomic Instability and the Incentive to Innovate," Centre for Growth and Business Cycle Research Discussion Paper Series 167, Economics, The Univeristy of Manchester.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.