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R&D and firm resilience during bad times

Author

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  • Gupta, Apoorva

Abstract

Can being innovative help firms to shield themselves from the disruptive effects of a recession? Using data for Spanish manufacturing firms, this paper finds that in industries hit severely by the Great Recession, firms with prior investment in R&D performed relatively better than non-innovative firms during the recession. The resilience of innovative firms is explained by their ability to promptly introduce product innovations. These firms do not seem to engage in process innovation to lower costs or improve production efficiency to adapt to a negative demand shock. Consequently, being innovative matters most for resilience in industries with a high scope for product differentiation. Matching innovative and non-innovative firms within industry groups along several firm characteristics and their pre-recession growth trajectory, and controlling for firm financing constraints, product-market scope, differences in labour adjustment costs or management quality supports the findings. The paper, thus, provides evidence for how investment in R&D today helps firms to cope with a dramatically changed external environment.

Suggested Citation

  • Gupta, Apoorva, 2026. "R&D and firm resilience during bad times," International Journal of Industrial Organization, Elsevier, vol. 105(C).
    • Handle: RePEc:eee:indorg:v:105:y:2026:i:c:s0167718725001122
    DOI: 10.1016/j.ijindorg.2025.103246
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    Keywords

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    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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