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The cyclical behavior of R&D investment during the Great Recession

Zeynep Kabukcuoglu ()
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Zeynep Kabukcuoglu: Villanova University

Authors registered in the RePEc Author Service: Zeynep Yom ()

Empirical Economics, 2019, vol. 56, issue 1, 301-323

Abstract: Abstract This paper investigates the cyclicality of research and development (R&D) activities during the Great Recession period by incorporating the role of credit constraints, using the Great Recession period as a natural case study. Recession period is a good setting in which to identify cyclicality and eliminate endogeneity issues that have been discussed in the literature. Using firm-level data on non-federally funded, high-technology firms in the USA, this paper shows that firms without bond ratings had more procyclical R&D investments than those firms with bond ratings. I also test whether capital or inventory investments of firms that also do R&D are procyclical. I find that firms without bond ratings adjust their inventories more rapidly compared to capital and R&D investments, when they are hit by a bad shock.

Keywords: Business cycles; R&D; Investment-liquidity sensitivity; Great Recession (search for similar items in EconPapers)
Date: 2019
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