This paper investigates the dynamics of R&D and capital investment using a large sample of US firms during the period 2002–2016. A partial adjustment approach is employed with a specific focus on the impact of the financial crisis on target adjustment speed. Evidence suggests that firms have a target in both types of investment and adjust to it at varying speeds. Specifically, firms adjusted to the capital investment target faster than to R&D investment. However, firms increased the adjustment speed in R&D investment significantly during the crisis, and it has remained at similar levels during the post-crisis period. The changes in adjustment speeds can be explained by several firm-specific characteristics that are related to the ability of firms to raise internal finance.
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- Department of Accounting, Finance, Logistics and Economics - Senior Lecturer in Accounting and Finance
- School of Business, Education and Law
- Northern Productivity Hub - Member