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Firm Level Investment and R&D in France and the United States: A Comparison

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Author Info

  • Benoit Mulkay

    (Universite des Antilles et de la Guyane)

  • Bronwyn H. Hall

    (Dept of Economics, UC Berkeley)

  • Jacques Mairesse

    (INSEE-CREST)

Abstract

This paper is a contribution to the small but growing literature that compares the investment and R&D behavior of manufacturing firms in large developed countries that have varying financial and capital market institutions. Specifically, we look at two similar samples of French and United States firms during the period 1982-1993. We estimate a dynamic specification of a simple error-corrected investment model for both ordinary investment and for R&D investment, a model that incorporates both output (sales or turnover) and cash flow as predictors for investment. Our focus is on two comparisons: France versus the United States and physical investment versus R&D investment. In general, we do not find any significant differences between the two countries in the long run effects of demand (output) on investment. However, we do find that cash flow or profits appear to have a much larger impact on both R&D and investment in the U.S. Except for the well-known difference in the serial correlation of the two types of capital spending, we reject any signficant differences between investment and R&D behavior for each country; the major differences are between countries.

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File URL: http://www.nuff.ox.ac.uk/Economics/papers/2001/w2/dbb10.pdf
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2001-W2.

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Length: 47pages
Date of creation: 25 Jan 2001
Date of revision:
Handle: RePEc:nuf:econwp:0102

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Web page: http://www.nuff.ox.ac.uk/economics/

Related research

Keywords: Investment; R&D; financing constraint; liquidity constraint; cash flow sensitivity; international comparison;

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References

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  1. Z, Griliches & Jacques Mairesse, 1997. "Production Functions : The Search for Identification," Working Papers 97-30, Centre de Recherche en Economie et Statistique.
  2. Stephen Bond & Julie Ann Elston & Jacques Mairesse & Benoît Mulkay, 1999. "Financial Factors and Investment in Belgium, France, Germany and the UK : A Comparison using Company Panel Data," Working Papers 99-64, Centre de Recherche en Economie et Statistique.
  3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
  4. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  5. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 2000. "Investment-Cash Flow Sensitivities Are Useful: A Comment On Kaplan And Zingales," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 695-705, May.
  6. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 5-27, July.
  7. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
  8. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
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