IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v17y2007i11p871-880.html
   My bibliography  Save this article

The relationship between capital investment and R&D spending: a panel cointegration analysis

Author

Listed:
  • Pieter J. de Jong

Abstract

Previous research has shown inconsistent results pertaining to the relationship between capital investment in property, plant and equity and research and development spending (R&D). This study re-examines that relationship between capital investment and R&D in a panel of 36 pharmaceutical firms. This study uses short- and long-run causality methods to capture the connection between the two variables. The short-run causality evidence confirms the research by Mairesse and Siu (1984) documenting that capital investment does not Granger-cause R&D and vice versa. On the other hand, the long-run causality test suggest that R&D and capital investment are cointegrated and the causality runs in both directions. These results imply that capital investment depends on the success of the R&D effort over time. The implementation of breakthroughs created by R&D may require additional capital investment, e.g. facilities and equipment. Moreover, thriving investment activity in one period may stimulate R&D efforts the next period, in order to extend the success of the current products.

Suggested Citation

  • Pieter J. de Jong, 2007. "The relationship between capital investment and R&D spending: a panel cointegration analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 17(11), pages 871-880.
    • Handle: RePEc:taf:apfiec:v:17:y:2007:i:11:p:871-880
    DOI: 10.1080/09603100600870976
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100600870976
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09603100600870976?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    2. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
    3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    4. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    5. Clive, W.J. & Lin, Jin-Lung, 1995. "Causality in the Long Run," Econometric Theory, Cambridge University Press, vol. 11(3), pages 530-536, June.
    6. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrea Borsato, 2022. "An agent-based model for Secular Stagnation in the USA: theory and empirical evidence," Journal of Evolutionary Economics, Springer, vol. 32(4), pages 1345-1389, September.
    2. Nair, Mahendhiran & Pradhan, Rudra P. & Arvin, Mak B., 2020. "Endogenous dynamics between R&D, ICT and economic growth: Empirical evidence from the OECD countries," Technology in Society, Elsevier, vol. 62(C).
    3. Andrea Borsato, 2021. "An Agent-based Model for Secular Stagnation in the USA: Theory and Empirical Evidence," LEM Papers Series 2021/09, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    4. Lin, Boqiang & Wang, Siquan, 2024. "Sustainability of renewable energy in China: Enhanced strategic investment and displaced R&D expenditure," Energy Economics, Elsevier, vol. 131(C).
    5. Andrin Spescha & Martin Woerter, 2021. "Research and development as an initiator of fixed capital investment," Journal of Evolutionary Economics, Springer, vol. 31(1), pages 117-145, January.
    6. Pongsapak Chindasombatcharoen & Pattanaporn Chatjuthamard & Pornsit Jiraporn & Sirimon Treepongkaruna, 2022. "Achieving sustainable development goals through board size and innovation," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(4), pages 664-677, August.
    7. Andrea Conte & Marco Vivarelli, 2014. "Succeeding in innovation: key insights on the role of R&D and technological acquisition drawn from company data," Empirical Economics, Springer, vol. 47(4), pages 1317-1340, December.
    8. Lin, Boqiang & Li, Minyang, 2023. "Emerging Industry Development and Information Transmission in Financial Markets: Evidence from China's Renewable Energy," Energy Economics, Elsevier, vol. 128(C).
    9. Stuart McLeay & Maxwell Stevenson, 2009. "Modelling the longitudinal properties of financial ratios," Applied Financial Economics, Taylor & Francis Journals, vol. 19(4), pages 305-318.
    10. Oliviero A. Carboni & Giuseppe Medda, 2018. "R&D, export and investment decision: evidence from European firms," Applied Economics, Taylor & Francis Journals, vol. 50(2), pages 187-201, January.
    11. Oliviero A. Carboni & Giuseppe Medda, 2021. "Innovative activities and investment decision: evidence from European firms," The Journal of Technology Transfer, Springer, vol. 46(1), pages 172-196, February.
    12. Gema Pastor-Agustin & Manuel Espitia-Escuer & Marisa Ramirez-Aleson, 2007. "A Q Model Investment System in Material and Immaterial Assets," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 43-64.
    13. Silverio Alarcón & Mercedes Sánchez, 2013. "External and Internal R&D, Capital Investment and Business Performance in the Spanish Agri-Food Industry," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(3), pages 654-675, September.
    14. Martin Andersson & Hans Lööf, 2012. "Small business innovation: firm level evidence from Sweden," The Journal of Technology Transfer, Springer, vol. 37(5), pages 732-754, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexander Schätz, 2010. "Macroeconomic Effects on Emerging Market Sector Indices," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 9(2), pages 131-169, August.
    2. Esther Stroe-Kunold & Joachim Werner, 2009. "A drunk and her dog: a spurious relation? Cointegration tests as instruments to detect spurious correlations between integrated time series," Quality & Quantity: International Journal of Methodology, Springer, vol. 43(6), pages 913-940, November.
    3. T.G. Saji, 2018. "Price transmission for natural rubber: India integration with world markets," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(617), W), pages 155-168, Winter.
    4. Committee, Nobel Prize, 2003. "Time-series Econometrics: Cointegration and Autoregressive Conditional Heteroskedasticity," Nobel Prize in Economics documents 2003-1, Nobel Prize Committee.
    5. Pesaran, M. Hashem & Shin, Yongcheol & Smith, Richard J., 2000. "Structural analysis of vector error correction models with exogenous I(1) variables," Journal of Econometrics, Elsevier, vol. 97(2), pages 293-343, August.
    6. Regli, Frederik & Nomikos, Nikos K., 2019. "The eye in the sky – Freight rate effects of tanker supply," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 125(C), pages 402-424.
    7. Jesus Gonzalo & Tae-Hwy Lee, 2000. "On the robustness of cointegration tests when series are fractionally intergrated," Journal of Applied Statistics, Taylor & Francis Journals, vol. 27(7), pages 821-827.
    8. Neil R. Ericsson & James G. MacKinnon, 2002. "Distributions of error correction tests for cointegration," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 285-318, June.
    9. Yanhua Chen & Rosario N Mantegna & Athanasios A Pantelous & Konstantin M Zuev, 2018. "A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates," PLOS ONE, Public Library of Science, vol. 13(3), pages 1-40, March.
    10. Sulaiman, Saidu & Masih, Mansur, 2017. "Is liberalizing finance the game in town for Nigeria ?," MPRA Paper 95569, University Library of Munich, Germany.
    11. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502.
    12. Miller, Stephen M. & Martins, Luis Filipe & Gupta, Rangan, 2019. "A Time-Varying Approach Of The Us Welfare Cost Of Inflation," Macroeconomic Dynamics, Cambridge University Press, vol. 23(2), pages 775-797, March.
    13. Md Shahiduzzaman & Allan Layton & Khorshed Alam, 2015. "On the contribution of information and communication technology to productivity growth in Australia," Economic Change and Restructuring, Springer, vol. 48(3), pages 281-304, November.
    14. Österholm, Pär, 2003. "Testing for Cointegration in Misspecified Systems –A Monte Carlo Study of Size Distortions," Working Paper Series 2003:21, Uppsala University, Department of Economics.
    15. Andriamanga, Fidimanantsoa, 2017. "Relation entre l’énergie et la croissance économique : approche empirique appliquée au cas de Madagascar pour la periode 1995 à 2015 [Relationship between energy consumption and economic growth in ," MPRA Paper 82967, University Library of Munich, Germany.
    16. Norman J. Morin, 2006. "Likelihood ratio tests on cointegrating vectors, disequilibrium adjustment vectors, and their orthogonal complements," Finance and Economics Discussion Series 2006-21, Board of Governors of the Federal Reserve System (U.S.).
    17. Carsten Trenkler*, 2005. "The Effects of Ignoring Level Shifts on Systems Cointegration Tests," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 89(3), pages 281-301, August.
    18. repec:ipg:wpaper:2014-474 is not listed on IDEAS
    19. Mohammad Jaforullah, 2015. "International tourism and economic growth in New Zealand," Working Papers 1502, University of Otago, Department of Economics, revised Apr 2015.
    20. Kawai, Masahiro & Ohara, Hidetaka, 1997. "Nonstationarity of Real Exchange Rates in the G7 Countries: Are They Cointegrated with Real Variables?," Journal of the Japanese and International Economies, Elsevier, vol. 11(4), pages 523-547, December.
    21. McCrae, Michael, et al, 2002. "Can Cointegration-Based Forecasting Outperform Univariate Models? An Application to Asian Exchange Rates," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 21(5), pages 355-380, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:17:y:2007:i:11:p:871-880. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.