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Does R&D Protect Smes From The Hardness Of The Cycle? Evidence From Spanish Smes (1990-2009)

Listed author(s):
  • Dolores Añón Higón

    (Department of Applied Economics II and ERICES, Universitat de València)

  • Miguel Manjón

    (QURE-CREIP Department of Economics, Universitat Rovira i Virgili)

  • Juan A. Máñez

    (Department of Applied Economics II and ERICES, Universitat de València)

  • Juan A. Sanchis-Llopis

    (Department of Applied Economics II and ERICES, Universitat de València)

This paper analyses whether undertaking R&D activities allows SMEs to attenuate the negative impact of recessions on productivity. In contrast to other studies we use a firm level indicator of the cycle based on firms’ own perceptions, while total factor productivity is obtained using a control function methodology in which we recognise the potential role that R&D experience might have in shaping future firms’ productivity. The analysis is performed using a representative sample of Spanish SMEs for the period 1990-2009. Results show both that R&D activities render positive productivity returns, and that performing R&D helps to alleviate the negative effects of downturns on productivity. Additionally, R&D seems to have a countercyclical effect upon SME’s productivity over the business cycle, as we find that SMEs R&D productivity premium in recessions doubles that of expansions.

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File URL: ftp://147.156.210.157/RePEc/pdf/eec_1411.pdf
File Function: First version, 2014
Download Restriction: no

Paper provided by Department of Applied Economics II, Universidad de Valencia in its series Working Papers with number 1411.

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Date of creation: Dec 2014
Handle: RePEc:eec:wpaper:1411
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  1. Diego Comin & Mark Gertler, 2006. "Medium-Term Business Cycles," American Economic Review, American Economic Association, vol. 96(3), pages 523-551, June.
  2. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 53-82.
  3. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
  4. Gadi Barlevy, 2004. "The Cost of Business Cycles Under Endogenous Growth," American Economic Review, American Economic Association, vol. 94(4), pages 964-990, September.
  5. Philippe Aghion & Philippe Askenazy & Nicolas Berman & Gilbert Cette & Laurent Eymard, 2012. "Credit Constraints And The Cyclicality Of R&D Investment: Evidence From France," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 1001-1024, October.
  6. Susanto Basu, 1996. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 719-751.
  7. Griliches, Zvi, 1980. "R & D and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 70(2), pages 343-348, May.
  8. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  9. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
  10. Dolores Añón Higón & Miguel Manjón Antolín & Juan A. Mañez, 2011. "Multinationals, R&D, and productivity: evidence for UK manufacturing firms," Industrial and Corporate Change, Oxford University Press, vol. 20(2), pages 641-659, April.
  11. Wooldridge, Jeffrey M., 2009. "On estimating firm-level production functions using proxy variables to control for unobservables," Economics Letters, Elsevier, vol. 104(3), pages 112-114, September.
  12. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
  13. Miguel Manjón & Juan Máñez & María Rochina-Barrachina & Juan Sanchis-Llopis, 2013. "Reconsidering learning by exporting," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(1), pages 5-22, March.
  14. Klepper, Steven, 1997. "Industry Life Cycles," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 145-181.
  15. Richard Ericson & Ariel Pakes, 1992. "An Alternative Theory of Firm and Industry Dynamics," Cowles Foundation Discussion Papers 1041, Cowles Foundation for Research in Economics, Yale University.
  16. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, vol. 79(1), pages 1-45, March.
  17. Jan-Benedict E. M. Steenkamp & Eric (Er) Fang, 2011. "The Impact of Economic Contractions on the Effectiveness of R&D and Advertising: Evidence from U.S. Companies Spanning Three Decades," Marketing Science, INFORMS, vol. 30(4), pages 628-645, July.
  18. Aghion, Philippe & Saint-Paul, Gilles, 1998. "VIRTUES OF BAD TIMES Interaction Between Productivity Growth and Economic Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 2(03), pages 322-344, September.
  19. Gadi Barlevy, 2007. "On the Cyclicality of Research and Development," American Economic Review, American Economic Association, vol. 97(4), pages 1131-1164, September.
  20. Stucchi, Rodolfo & Escribano, Álvaro, 2008. "Catching up in total factor productivity through the business cycle : evidence from Spanish manufacturing surveys," UC3M Working papers. Economics we085125, Universidad Carlos III de Madrid. Departamento de Economía.
  21. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
  22. Dominique Guellec & Sacha Wunsch-Vincent, 2009. "Policy Responses to the Economic Crisis: Investing in Innovation for Long-Term Growth," OECD Digital Economy Papers 159, OECD Publishing.
  23. Audretsch, David B & Mahmood, Talat, 1995. "New Firm Survival: New Results Using a Hazard Function," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 97-103, February.
  24. repec:fth:harver:1473 is not listed on IDEAS
  25. Ackerberg, Daniel & Caves, Kevin & Frazer, Garth, 2006. "Structural identification of production functions," MPRA Paper 38349, University Library of Munich, Germany.
  26. Min Ouyang, 2011. "On the Cyclicality of R&D," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 542-553, May.
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