Innovation capability, credit constraint and the cyclicality of R&D investment

Jianpo Xue, Chong Yip and Junwei Zheng

Economics Letters, 2021, vol. 199, issue C

Abstract: This paper generalizes the theoretical model of Aghion et al. (2012) to re-examine the cyclicality of R&D investment with credit constraint and linear production with different innovation capabilities. In contrast to their procyclical conclusion, we show that the R&D investment can be acyclical, procyclical, or countercyclical depending on the innovation capability, the tightness of credit constraint and the level of an entrepreneur‘s wealth.

Keywords: Credit constraint; Innovation capability; R&D investment; Cyclicality; Wealth (search for similar items in EconPapers)
JEL-codes: E22 E32 O16 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:199:y:2021:i:c:s0165176520304651

DOI: 10.1016/j.econlet.2020.109705

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