The Impact of the Financial Crisis on Innovation and Growth: Evidence from Technology Research and Development

An increasing body of literature discusses how and to which extent the financial crisis of 2007-2009 transmits to the real economy. This paper investigates the impact of the financial crisis of 2007-2009 on corporate investment, in particular research and development (R&D) expenditures. We measure financial constraints and financial distress of firms and investigate whether those measures have a significant impact on R&D during the financial crisis. We find evidence that financial distress has little impact for our sample of listed technology firms and we argue that the credit supply shock does not play a decisive role as financially constrained firms invest comparatively more than non-constrained firms during the crisis.