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Firm-level R&D after periods of intense technological innovation: the role of investor sentiment

Sirio Aramonte and Matthew Carl

No 916, BIS Working Papers from Bank for International Settlements

Abstract: Following periods of intense technological innovation, R&D is a critical driver of technology diffusion, but it is subject to frictions that can lower it below the level firms would undertake otherwise. We study whether sentiment can counterbalance these frictions and thus strengthen the link between firm-level R&D and lagged aggregate innovation. We find a positive answer for low-tech firms, which represent the main conduit for technology diffusion. The effect is stronger in the presence of informational externalities, that is when the results of experimentation funded by a company are observable by competitors. In contrast to the literature on sentiment and capital expenditures, the effect is weaker for financially constrained firms.

Keywords: investor sentiment; technological innovation; R&D (search for similar items in EconPapers)
JEL-codes: G02 G31 O32 O33 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2021-01
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-cse, nep-ino, nep-knm, nep-sbm and nep-tid
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