R&D Spending and Investment Decision: Evidence from European Firms
|R&D Spending and Investment Decision: Evidence from European Firms
|Year of Publication
|Carboni, OA, Medda, G
|978 88 8467 955 0
|firm 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.