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

Philippe Aghion (1) , Philippe Askenazy (2, 3, 4) , Nicolas Berman (5) , Gilberte Cette (4, 6) , Laurent Eymard (4)

1 Harvard University [Cambridge]
2 PSE - Paris-Jourdan Sciences Economiques
3 PSE - Paris School of Economics
4 Banque de France
5 Graduate Institute of International and Development Studies
6 AMU - Aix Marseille Université

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.

Keywords: business cycles; R&D; credit constraints; volatility

Domains: Humanities and Social Sciences; Economics and Finance

Philippe Aghion, Philippe Askenazy, Nicolas Berman, Gilberte Cette, Laurent Eymard. Credit Constraints and the Cyclicality of R&D Investment: Evidence from Micro Panel data. Journal of the European Economic Association, 2012, 10 (5), pp.1001-1024. ⟨10.1111/j.1542-4774.2012.01093.x⟩. ⟨halshs-00754573⟩