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Does Cash Flow Cause Investment and R&D: An Exploration Using Panel Data for French, Japanese, and United States Scientific Firms

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Listed:
  • Bronwyn H. Hall

    (Nuffield College & Oxford & University of California at Berkeley & IFS & NBER)

  • Jacques Mairesse

    (INSEE-CREST & EHESS & NBER)

  • Lee Branstetter

    (UC Davis & NBER)

  • Bruno Crepon

    (INSEE-CREST)

Abstract

The role of financial institutions and corporate governance in the conduct and performance of industrial firms, especially in the area of technological innovation and international competition has been hotly debated in the recent past. The results presented here are a contribution to the empirical evidence on the behavior of individual firms that exist in somewhat different institutional environments. Using a Panel Data version of the Vector Auto Regressive (VAR) methodology, we test for causal relationship among sales and cash flow on the one hand and investment and R&D on the other, using three large panels of firms in the scientific (high technology) sectors in the United States, France, and Japan. Our findings are that both investment and R&D are more highly sensitive to cash flow and sales in the United States than in France and Japan. Corresponding, both investment and R&D predict both cash flow and sales positively in the United States, while the impact is somewhat more mixed in the other countries.

Suggested Citation

  • Bronwyn H. Hall & Jacques Mairesse & Lee Branstetter & Bruno Crepon, 1999. "Does Cash Flow Cause Investment and R&D: An Exploration Using Panel Data for French, Japanese, and United States Scientific Firms," Finance 9902005, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:9902005
    Note: Type of Document - Acrobat .pdf; prepared on Maybe TeX; to print on HP/; pages: 49; figures: included
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    investment; R&D; panel data; international comparisons; cash flow; firm-level;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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