How do demand fluctations and credit constraints affect R&D? Evidence from Central, Southern and Eastern Europe

Kadri Männasoo () and Jaanika Meriküll ()

No wp2011-09, Bank of Estonia Working Papers from Bank of Estonia

Abstract: The opportunity cost approach suggesting a countervailing cyclical effect between R&D and short-term investments is the subject of theoretical and empirical debate. We extend the discussion by investigating the impact of demand fluctuations and credit constraints on firms\' R&D in ten new EU member states from Central, Southern and Eastern Europe (CSEE). Using membership of the OECD as a proxy for the country\'s level of development we find more counter-cyclicality amongst the firms in non-OECD CSEE countries, while a similar but somewhat less accentuated counter-cyclical pattern of R&D behaviour emerges in the more advanced OECD-CSEE countries. Surprisingly, any adverse effect from credit constraints on firm\'s engagement in R&D is largely absent in CSEE countries

Keywords: R&D cyclicality; demand shocks; credit constraints; Central and Eastern Europe (search for similar items in EconPapers)
JEL-codes: G31 E32 O30 O52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ino and nep-tra
Date: 2011-07-19, Revised 2011-07-19
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