Demand Fluctuations, Financing Constraints, And R&d Spending: Empirical Evidence From Data Of Industries And Regions

This paper explores the relationship between R&D expenditures and demand fluctuations, using the two panel data sets of36industries and30provinces over the period1997-2008. Our main results can be summarized as follows:(1) As a whole, R&D is in fact procyclical, but the cyclically of R&D differs across industries;(2) we find that financing constraint serves as a useful explanation, the R&D expenditure is procyclical with financing constraint, but it becomes less procyclical when facing weaker financing constraint;(3) when reaching the threshold, it becomes counter-cyclical, this is consistent with opportunity cost hypothesis;(4) the industry with heavier R&D intensity is more sensitivity to financing constraint, especially high-technology industry. Financial deepening can mitigate the procyclical R&D expenditure, while publicly finance support will be more effectively for high-technology industry.