Credit Constraints and the Cyclicality of R&D Investment: Evidence from Micro Panel data

Authors:
  • PAPhilippe Aghion
    Philippe Aghion
  • PAPhilippe Askenazy
    Philippe Askenazy
  • NBNicolas Berman
    Nicolas Berman
  • GCGilberte Cette
    Gilberte Cette
  • LELaurent Eymard
    Laurent Eymard
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  • 1 January 2012
Abstract
We use a French firm-level data set containing 13,000 firms over the period 1994-2004 to analyze the relationship between credit constraints and firms' R&D behavior over the business cycle. Our main results can be summarized as follows: (i) R&D investment is countercyclical without credit constraints, but it becomes procyclical as firms face tighter credit constraints; (ii) this result is only observed for firms in sectors that depend more heavily upon external finance, or that are characterized by a low degree of asset tangibility; (iii) in more credit-constrained firms, R&D investment plummets during recessions but does not increase proportionally during upturns.