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Hitting the gas or the brake? Recessions and firms' knowledge investments
Author(s) -
Knudsen Eirik Sjåholm,
Lien Lasse B.
Publication year - 2019
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3086
Subject(s) - investment (military) , economics , recession , monetary economics , capital (architecture) , human capital , labour economics , market economy , macroeconomics , history , archaeology , politics , political science , law
Purpose We examine how firms alter their investment behavior in response to changes in demand and access to credit during recessions. We compare and contrast investment changes in physical assets, R&D, and human capital. Findings We find that firms tend to shield R&D investments from transitory fluctuations in demand and that R&D investments are more sensitive to credit changes than usually assumed. For human capital, we find a cubic relationship between investments and demand changes. Conclusion Important variation and trade‐offs remain hidden if investment is treated as a single category or if the distinction between demand and credit impulses is not made.