Sources of Finance, R&D Investment and Productivity: Correlation or Causality?

Hans Lööf () and Almas Heshmati ()

No 11, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: In general there is agreement about the positive impacts of R&D on performance of firms measured as productivity, profitability and growth. However, the opposite relationship is less obvious and very little attention has been paid on examining the feedback from performance on investment. This study is an attempt to contribute to the empirical analysis of the causal relationship between investment and performance. We examine the interaction between a number of financial indicators represented by investments in R&D and tangible capital and a number of performance variables including sales, value added, profit, cash flow, capital structure and employment on R&D and physical capital investments. Empirical results are based on a large panel data set of Swedish manufacturing firms over the period 1992-2000. The results show evidence of weak feedback effects from performance on investment.

Keywords: R&D Investsments; Productivity; Financial constraints; Panel Data (search for similar items in EconPapers)
JEL-codes: C23 C33 G32 L19 O33 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2004-09-24
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Forthcoming in ICFAI Journal of Industrial Economics, 2006.

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:cesisp:0011

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