Does Cash Flow cause Investment and R&D: An Exploration Using Panel Data for French, Japanese, and United States Scientific Firms

The role of financial institutions and corporate governance in the conduct and performance of industrial firms, especially in the area of technological innovation and international competition has been hotly debated in the recent past. The results presented here are a contribution to the empirical evidence on the behaviour of individual firms that exist in somewhat different institutional environments. Using a panel data version of the Vector Auto Regressive (VAR) methodology, we test for causal relationship among sales and cash flow on the one hand and investment and R&D on the other.