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Credit Constraints and the Cyclicality of R&D Investment: Evidence from France

  • Aghion, Philippe
  • Askenazy, Philippe
  • Berman, Nicolas
  • Cette, Gilbert
  • Eymard, Laurent

We use a French firm-level data set containing 13,000 firms over the period 1994–2004 to analyze the relationship between credit constraints and firms’ R&D behavior over the business cycle. Our main results can be summarized as follows: (i) R&D investment is countercyclical without credit constraints, but it becomes procyclical as firms face tighter credit constraints; (ii) this result is only observed for firms in sectors that depend more heavily upon external finance, or that are characterized by a low degree of asset tangibility; (iii) in more credit-constrained firms, R&D investment plummets during recessions but does not increase proportionally during upturns.

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File URL: http://dash.harvard.edu/bitstream/handle/1/12490632/Credit%20Constraints%20and%20the%20Cyclicality%20of%20R&D%20Investments-%20Evidence%20from%20France.pdf
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Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 12490632.

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Date of creation: 2012
Date of revision:
Publication status: Published in Journal of the European Economic Association
Handle: RePEc:hrv:faseco:12490632
Contact details of provider: Postal: Littauer Center, Cambridge, MA 02138
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Web page: http://www.economics.harvard.edu/

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  1. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  2. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
  3. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers 11349, National Bureau of Economic Research, Inc.
  4. Comin, D. & Gertler, M., 2003. "Medium Term Business Cycles," Working Papers 03-05, C.V. Starr Center for Applied Economics, New York University.
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