The symmetry and cyclicality of R&D spending in advanced economies

Norman H. Sedgley (), John Burger and Kerry M. Tan ()
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Norman H. Sedgley: Loyola University Maryland
Kerry M. Tan: Loyola University Maryland

Empirical Economics, 2019, vol. 57, issue 5, No 13, 1828 pages

Abstract: Abstract This paper explores the impact of cyclical macroeconomic fluctuations on corporate R&D spending. Most existing studies are conducted at the industry or firm level and find procyclical corporate R&D. Some of these studies also provide evidence suggesting credit constraints play an important role in explaining the cyclical behavior of R&D. Our analysis of the relationship between GDP, credit, and R&D begins with a theoretical model that allows for the possibility of credit constraints. We then turn to an empirical analysis of a panel of 22 advanced economies. Our most robust empirical finding is that R&D is symmetrically procyclical even after controlling for credit market conditions. We conclude that credit market conditions are not sufficient to fully explain the procyclical behavior of R&D and that procyclical incentives for innovative activity are also likely to play an important role.

Keywords: R&D spending; Credit constraints; Business cycle (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s00181-018-1508-6

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