Firm Characteristics and the Cyclicality of R&D Investments

Posted by D. Daniel Sokol

Spyros Arvanitis (KOF Swiss Economic Institute, ETH Zurich, Switzerland) and Martin Woerter (KOF Swiss Economic Institute, ETH Zurich, Switzerland) explore Firm Characteristics and the Cyclicality of R&D Investments.

ABSTRACT: Aim of this study is to combine micro-aspects of firm behaviour with macro-aspects of business development and identify market conditions (for example, price competition) and firm characteristics (for example, type of R&D partners) that enable a firm to have a procyclical, anti-cyclical or non-systematic R&D investment behaviour. New elements of our analysis are: (a) the identification in our data of the above three main types of R&D behaviour with respect to the fluctuation of overall economic activity as measured by a standard composite indicator of the business conditions at industry level and (b) the investigation of a series of hypotheses as to innovation-relevant firm characteristics that underline the three different behaviour categories. The empirical results confirm to large extent our hypotheses and allow us to make profiles of the three types of R&D behaviour.