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Comparison of adjustment speeds in target research and development and capital investment: What did the financial crisis of 2007 change?

Beata Coldbeck and Aydin Ozkan

Journal of Business Research, 2018, vol. 84, issue C, 1-10

Abstract: This paper investigates the dynamics of R&D and capital investment using a large sample of US firms during the period 2002–2016. A partial adjustment approach is employed with a specific focus on the impact of the financial crisis on target adjustment speed. Evidence suggests that firms have a target in both types of investment and adjust to it at varying speeds. Specifically, firms adjusted to the capital investment target faster than to R&D investment. However, firms increased the adjustment speed in R&D investment significantly during the crisis, and it has remained at similar levels during the post-crisis period. The changes in adjustment speeds can be explained by several firm-specific characteristics that are related to the ability of firms to raise internal finance.

Keywords: R&D; Capital investment; Speed of adjustment; Financial crisis (search for similar items in EconPapers)
JEL-codes: G33 G34 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.jbusres.2017.10.042

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