Credit Constraints and the Cyclicality of R&D Investment: Evidence from Micro Panel data

Journal article: 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.

Author(s)

Philippe Aghion, Philippe Askenazy, Nicolas Berman, Gilberte Cette, Laurent Eymard

Journal
  • Journal of the European Economic Association
Date of publication
  • 2012
Keywords JEL
E22 E32 O16 O30 O32
Keywords
  • Business cycles
  • R&D
  • Credit constraints
  • Volatility
Pages
  • 1001-1024
Version
  • 1
Volume
  • 10