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

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  • Benoît Mulkay

    (Crest)

  • Bronwyn H, Hall

    (Crest)

  • Jacques Mairesse

    (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 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 significant differences between investment and R&D behavior for each country; the major differences are between countries.
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  • Benoît Mulkay & Bronwyn H, Hall & Jacques Mairesse, 2000. "Firm Level Investment and R&D in France and the United States : A Comparison," Working Papers 2000-49, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2000-49
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    References listed on IDEAS

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    1. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
    2. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
    3. 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, Oxford University Press, vol. 115(2), pages 695-705.
    4. Stephen Bond & Julie Elston & Jacques Mairesse & Benoit Mulkay, 1997. "Financial factors and investment in Belgium, France, German and the UK: A comparison using company panel data," IFS Working Papers W97/08, Institute for Fiscal Studies.
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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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