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How do housing cycles influence listed firms’ R&D investment: evidence from the collateral channel

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  • Zhao Rong
  • Jinlan Ni

Abstract

Firm innovation is essential to long-run economic growth. Financially constrained R&D firms may use firm-owned properties as collateral to finance their R&D projects. Therefore, the housing price cycle can affect firms’ R&D investment through influencing their real estate value. By examining listed R&D firms during the housing boom period 2002–2006 in the U.S., we find that a $1 increase in real estate value leads a firm to increase its R&D investment by $0.38. We also find that this collateral effect is more pronounced among financially constrained R&D firms than that among unconstrained ones. Additionally, we examine the housing bust period 2008–2012, and find that real estate depreciation retarded R&D investment, especially among constrained R&D firms.

Suggested Citation

  • Zhao Rong & Jinlan Ni, 2020. "How do housing cycles influence listed firms’ R&D investment: evidence from the collateral channel," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 29(3), pages 287-312, April.
    • Handle: RePEc:taf:ecinnt:v:29:y:2020:i:3:p:287-312
    DOI: 10.1080/10438599.2019.1616662
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    Cited by:

    1. Xiaojie Wang & Yi Duan & Pengcheng Liu & Guixin Han, 2020. "The Influence of Housing Investment on Urban Innovation: An Empirical Analysis Based on City-Level Panel Data in China," Sustainability, MDPI, vol. 12(7), pages 1-15, April.
    2. Rong, Zhao & Zhang, Fuxin & Chen, Shi, 2023. "Short-term loans and Firms' high-quality innovation: Evidence from the access to patent-backed loans in China," China Economic Review, Elsevier, vol. 78(C).

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