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The cyclical behavior of R&D investment during the Great Recession

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  • Zeynep Kabukcuoglu

    (Villanova University)

Abstract

This paper investigates the cyclicality of research and development (R&D) activities during the Great Recession period by incorporating the role of credit constraints, using the Great Recession period as a natural case study. Recession period is a good setting in which to identify cyclicality and eliminate endogeneity issues that have been discussed in the literature. Using firm-level data on non-federally funded, high-technology firms in the USA, this paper shows that firms without bond ratings had more procyclical R&D investments than those firms with bond ratings. I also test whether capital or inventory investments of firms that also do R&D are procyclical. I find that firms without bond ratings adjust their inventories more rapidly compared to capital and R&D investments, when they are hit by a bad shock.

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  • Zeynep Kabukcuoglu, 2019. "The cyclical behavior of R&D investment during the Great Recession," Empirical Economics, Springer, vol. 56(1), pages 301-323, January.
    • Handle: RePEc:spr:empeco:v:56:y:2019:i:1:d:10.1007_s00181-017-1358-7
    DOI: 10.1007/s00181-017-1358-7
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