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- Title
The symmetry and cyclicality of R&D spending in advanced economies.
- Authors
Sedgley, Norman H.; Burger, John D.; Tan, Kerry M.
- Abstract
This paper explores the impact of cyclical macroeconomic fluctuations on corporate R&D spending. Most existing studies are conducted at the industry or firm level and find procyclical corporate R&D. Some of these studies also provide evidence suggesting credit constraints play an important role in explaining the cyclical behavior of R&D. Our analysis of the relationship between GDP, credit, and R&D begins with a theoretical model that allows for the possibility of credit constraints. We then turn to an empirical analysis of a panel of 22 advanced economies. Our most robust empirical finding is that R&D is symmetrically procyclical even after controlling for credit market conditions. We conclude that credit market conditions are not sufficient to fully explain the procyclical behavior of R&D and that procyclical incentives for innovative activity are also likely to play an important role.
- Subjects
BOND market; CREDIT control; PANEL analysis; BUSINESS cycles; SYMMETRY
- Publication
Empirical Economics, 2019, Vol 57, Issue 5, p1811
- ISSN
0377-7332
- Publication type
Article
- DOI
10.1007/s00181-018-1508-6