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R&D in boom and boost : evidence from the World Bank Financial Crisis Survey

Author

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  • Kadri M�nnasoo
  • Jaanika Merikull

Abstract

The full implications of the global financial crisis of 2008-2009 are yet to be revealed. The crucial question is whether a crisis of such severe magnitude will set "cleansing mechanisms" into motion as suggested by the opportunity cost argument of R&D, or rather destroy the long-term productivity enhancing incentives? The World Bank Financial Crisis Survey collects direct self-reported measures of firms' credit frictions and R&D during 2009-2010 from six countries: Bulgaria, Latvia, Lithuania, Hungary, Romania and Turkey. Employing this dataset, we seek evidence of how the firms' R&D responded to the negative demand shock and credit contraction at the time of the crisis. Looking at two distinct episodes, the sustained economic growth in 2001-2007 and the sudden slump in 2009-2010, we observe a paradigm shift in firms' R&D decisions: whilst the R&D is counter-cyclical during the pre-crisis period, a pro-cyclical pattern emerges during the crisis

Suggested Citation

  • Kadri M�nnasoo & Jaanika Merikull, 2011. "R&D in boom and boost : evidence from the World Bank Financial Crisis Survey," Bank of Estonia Working Papers wp2011-07, Bank of Estonia, revised 13 Jul 2011.
    • Handle: RePEc:eea:boewps:wp2011-07
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    R&D cyclicality; demand shocks; credit constraints; financial crisis;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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