R&D Spending and Investment Decision: Evidence from European Firms

TitleR&D Spending and Investment Decision: Evidence from European Firms
Publication TypeWorking Paper
Year of Publication2015
AuthorsOA. Carboni, G. Medda
ISBN Number978 88 8467 955 0
Keywordsfirm behavior, investment, IV model, r&d

This paper investigates the role of research activity and other micro determinants, on firms' investment behaviour. The empirical analysis is based on a large representative and cross-country comparative sample of manufacturing firms across seven European countries. Given the potential simultaneity between investment decision and R&D spending, we used an instrumental variable procedure to overcome the problem of endogeneity and an instrument was constructed to cope with this issue. We find that R&D positively affects investment decisions. The analysis highlights the importance of financial factors, particularly with respect to firms’ internal resources, and also sensible cross-country effects, in determining the investment level.

Citation Key6547
PDF icon WP15-15.pdf1.17 MB