Interest rates, R&D investment and the distortionary effects of R&D incentivesUluc Aysun and
Zeynep Kabukcuoglu
European Economic Review, 2019, vol. 111, issue C, 191-210 Abstract: This paper conducts the first analysis of how interest rates are related to firms’ allocation of investment between R&D and non-R&D activities and how R&D incentives alter this relationship. It theoretically predicts that if firms receive incentives mostly in the form of grants and subsidies that reduce their dependence on external finance, their share of R&D spending increases (decreases) during a credit tightening (easing). Conversely, if tax credits are the primary incentive, firms decrease (increase) their share of R&D spending during a credit tightening (easing). The paper demonstrates empirical support for these predictions by using firm-level financial and sector-level R&D incentives data and a unique methodology that focuses on the within firm allocation of investment. Keywords: R&D; Finance; Grants; Tax credits; COMPUSTAT (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:111:y:2019:i:c:p:191-210 DOI: 10.1016/j.euroecorev.2018.09.006 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
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