Ownership and cyclicality of firms’ R&D investment

In this paper we analyse the effect of ownership on the response of firms?’ R&D expenditures to the business cycles in the economy, using a panel dataset of Spanish manufacturing firms for the period 1990-2006. Following Aghion et al. (2012), we allow the impact of the business cycle on firms?' R&D expenditures to depend upon credit constraints, but we extend their analysis by considering the moderating effect of different firms?’ ownership types. We find that firms?’ R&D spending is countercyclical but that credit constraints may reverse this countercyclicality, in line with previous results in the literature. However, our findings indicate that these results are moderated by firms?’ ownership. In particular, in the case of firms that are family owned and firms that are group affiliated the responsiveness of R&D to the business cycle is considerably less dependent on being credit constrained, especially during recessions.