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

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Author Info
Philippe Aghion
Philippe Askenazy
Nicolas Berman
Gilbert Cette
Laurent Eymard

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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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Paper provided by PSE (Ecole normale supérieure) in its series PSE Working Papers with number 2008-26.

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Date of creation: 2008
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Handle: RePEc:pse:psecon:2008-26

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  2. Diego Comin & Mark Gertler, 2006. "Medium-Term Business Cycles," American Economic Review, American Economic Association, vol. 96(3), pages 523-551, June. [Downloadable!]
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  3. Gadi Barlevy, 2007. "On the Cyclicality of Research and Development," American Economic Review, American Economic Association, vol. 97(4), pages 1131-1164, September. [Downloadable!]
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  6. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June. [Downloadable!] (restricted)
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  7. Nick Bloom, 2007. "Uncertainty and the Dynamics of R&D," CEP Discussion Papers dp0792, Centre for Economic Performance, LSE. [Downloadable!]
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  8. repec:fth:harver:1473 is not listed on IDEAS
  9. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers 11349, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June. [Downloadable!]
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  1. Martinsson, Gustav, 2009. "Finance and R&D Investments - is there a debt overhang effect on R&D investments?," Working Paper Series in Economics and Institutions of Innovation 174, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
  2. Patrick Musso & Stefano Schiavo, 2007. "The Impact of Financial Constaints on Firm Survival and Growth," Documents de Travail de l'OFCE 2007-37, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
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  3. Alberto Chong & Mark Gradstein, 2009. "Volatility and firm growth," Journal of Economic Growth, Springer, vol. 14(1), pages 1-25, March. [Downloadable!] (restricted)
  4. Martinsson, Gustav, 2009. "Are there Financial Constraints for Firms Investing in Skilled Employees?," Working Paper Series in Economics and Institutions of Innovation 169, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
  5. Martinsson, Gustav, 2008. "The Impact of Firm Collateral on Knowledge Intensive Consulting Firms," Working Paper Series in Economics and Institutions of Innovation 135, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
  6. Simona Bovha-Padilla & Joze P. Damijan & Jozef Konings, 2009. "Financial Constraints and the Cyclicality of R&D Investment:Evidence from Slovenia," LICOS Discussion Papers 23909, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  7. Marialuz Moreno Badia & Veerle Slootmaekers, 2008. "The Missing Link Between Financial Constraints and Productivity," LICOS Discussion Papers 20808, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
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  8. Martinsson, Gustav, 2008. "Firm Collateral and the Cyclicality of Knowledge Intensity," Working Paper Series in Economics and Institutions of Innovation 134, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
  9. Giovanni Dosi & Giorgio Fagiolo & Andrea Roventini, 2008. "Schumpeter Meeting Keynes: A Policy-Friendly Model of Endogenous Growth and Business Cycles," LEM Papers Series 2008/21, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
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  10. Sandra Poncet & Walter Steingress & Hylke Vandenbussche, 2008. "Financial constraints in China: firm-level evidence," LICOS Discussion Papers 22608, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
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