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The symmetry and cyclicality of R&D spending in advanced economies

Author

Listed:
  • Norman H. Sedgley

    (Loyola University Maryland)

  • John D. Burger

    (Loyola University Maryland)

  • Kerry M. Tan

    (Loyola University Maryland)

Abstract

This paper explores the impact of cyclical macroeconomic fluctuations on corporate R&D spending. Most existing studies are conducted at the industry or firm level and find procyclical corporate R&D. Some of these studies also provide evidence suggesting credit constraints play an important role in explaining the cyclical behavior of R&D. Our analysis of the relationship between GDP, credit, and R&D begins with a theoretical model that allows for the possibility of credit constraints. We then turn to an empirical analysis of a panel of 22 advanced economies. Our most robust empirical finding is that R&D is symmetrically procyclical even after controlling for credit market conditions. We conclude that credit market conditions are not sufficient to fully explain the procyclical behavior of R&D and that procyclical incentives for innovative activity are also likely to play an important role.

Suggested Citation

  • Norman H. Sedgley & John D. Burger & Kerry M. Tan, 2019. "The symmetry and cyclicality of R&D spending in advanced economies," Empirical Economics, Springer, vol. 57(5), pages 1811-1828, November.
    • Handle: RePEc:spr:empeco:v:57:y:2019:i:5:d:10.1007_s00181-018-1508-6
    DOI: 10.1007/s00181-018-1508-6
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    Cited by:

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    3. Miroslav Gabrovski, 2020. "Simultaneous Innovation and the Cyclicality of R&D," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 122-133, April.
    4. Michal Tvrdon & Tomas Verner, 2022. "Government Support of Science and the Impact of the Crisis: The Case of the EU Countries," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 24(Special16), pages 989-989, November.

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