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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
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Publication status: Published in Journal of the European Economic Association
Handle: RePEc:hrv:faseco:12490632
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  1. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
  2. Zvi Griliches, 1990. "Patent Statistics as Economic Indicators: A Survey," NBER Working Papers 3301, National Bureau of Economic Research, Inc.
  3. repec:fth:harver:1473 is not listed on IDEAS
  4. Hall, Bronwyn H, 1993. "The Stock Market's Valuation of R&D Investment during the 1980's," American Economic Review, American Economic Association, vol. 83(2), pages 259-64, May.
  5. 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.
  6. Bean, C., 1989. "Endogenous Growth And The Procyclical Behaviour Of Productivity," Papers 369, London School of Economics - Centre for Labour Economics.
  7. Diego Comin & Mark Gertler, 2003. "Medium Term Business Cycles," NBER Working Papers 10003, National Bureau of Economic Research, Inc.
  8. 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.
  9. Benoit Mulkay & Bronwyn H. Hall & Jacques Mairesse, 2000. "Firm Level Investment and R&D in France and the United States: A Comparison," NBER Working Papers 8038, National Bureau of Economic Research, Inc.
  10. Ricardo J. Caballero & Mohamad L. Hammour, 1991. "The Cleansing Effect of Recessions," NBER Working Papers 3922, National Bureau of Economic Research, Inc.
  11. Bronwyn Hall & Benoit Mulkay and Jacques Mairesse, 2001. "Firm Level Investment and R and D in France and the United States: A Comparison," Economics Series Working Papers 2001-W02, University of Oxford, Department of Economics.
  12. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
  13. Robert E. Hall, 1991. "Labor Demand, Labor Supply, and Employment Volatility," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 17-62 National Bureau of Economic Research, Inc.
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