R&D Spending and Investment Decision: Evidence from European Firms
Oliviero Carboni and
Giuseppe Medda ()
Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia
This paper investigates the role of research activity and other micro determinants, on firms' investment behaviour. The empirical analysis is based on a large representative and cross-country comparative sample of manufacturing firms across seven European countries. Given the potential simultaneity between investment decision and R&D spending, we used an instrumental variable procedure to overcome the problem of endogeneity and an instrument was constructed to cope with this issue. We find that R&D positively affects investment decisions. The analysis highlights the importance of financial factors, particularly with respect to firms' internal resources, and also sensible cross-country effects, in determining the investment level.
Keywords: r&d; IV model; investment; firm behavior (search for similar items in EconPapers)
JEL-codes: C31 O32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-eur, nep-ino, nep-knm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:cns:cnscwp:201515
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