 Did financial frictions stifle R&D investment in Europe during the great recession?Journal of International Money and Finance, 2022, vol. 120, issue C Abstract: We investigate the role of financial frictions in R&D spending in a large sample of European firms. Our identification strategy exploits the contraction in credit supply that followed the 2008–09 global financial crisis and 2012 Euro area sovereign debt crisis, together with differences in financial frictions across firms and industries to identify a causal effect of financial constraints on investment in innovation. We show that firms that are more likely financially constrained, in industries more dependent on external finance, invest disproportionally less in R&D during periods of tight credit supply. Smaller, private firms with weaker balance sheets also have a lower share of R&D in total investment, suggesting R&D drops more than total investment during these crisis episodes. These results are robust to different proxies of financial constraints and fixed-effects identification strategies. Keywords: Financial frictions; Investment; Innovation; R&D spending (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:120:y:2022:i:c:s0261560620302199 DOI: 10.1016/j.jimonfin.2020.102263 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.