Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/228174
Authors: 
Peia, Oana
Romelli, Davide
Year of Publication: 
2019
Series/Report no.: 
Working Paper Series No. WP19/26
Abstract: 
Using the 2008-09 Global financial crisis and the 2012 Euro area sovereign debt crisis as natural experiments, we investigate the effects of contractions in credit supply on R&D spending in a large sample of European firms. Our identification strategy exploits differences in financial constraints across firms, as well as the cross-industry variation in dependence on external finance, to identify a causal effect of bank credit supply on firm investment in innovation. We show that firms that are more likely financially constrained, in industries more dependent on external finance, have a disproportionally lower growth rate of R&D spending, as well as lower R&D intensity and share of R&D investment in total investment during periods of tight credit supply. These results are robust to different proxies of financial constraints, model specifications and fixed-effects identification strategies.
Subjects: 
financial frictions
investment
innovation
R&D spending
JEL: 
O30
G21
I22
Document Type: 
Working Paper

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