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Comparison of adjustment speeds in target research and development and capital investment: What did the financial crisis of 2007 change?

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  • Coldbeck, Beata
  • Ozkan, Aydin

Abstract

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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  • Coldbeck, Beata & Ozkan, Aydin, 2018. "Comparison of adjustment speeds in target research and development and capital investment: What did the financial crisis of 2007 change?," Journal of Business Research, Elsevier, vol. 84(C), pages 1-10.
    • Handle: RePEc:eee:jbrese:v:84:y:2018:i:c:p:1-10
    DOI: 10.1016/j.jbusres.2017.10.042
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    More about this item

    Keywords

    R&D; Capital investment; Speed of adjustment; Financial crisis;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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