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R&D and firm resilience during bad times

Apoorva Gupta

No 352, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: Can being innovative help firms to shield themselves from the disruptive effects of a recession? Using data for Spanish manufacturing firms, this paper finds that innovative firms suffered considerably less compared to noninnovative firms during the Great Recession. The operating mechanism for the resilience of innovative firms to market disruption during a recession is product differentiation, and not reduction in marginal cost of production and prices with process innovation. The data does not support alternative explanations such as better access to capital, or difference in labour moving costs for innovative firms. The results provide evidence for the role of innovation in making firms dynamically capable and resilient to large negative shocks.

Keywords: Innovation; Recession; Resilience; Product differentiation; Dynamic capability (search for similar items in EconPapers)
JEL-codes: E32 L25 O30 O31 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cfn, nep-ino, nep-mac, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:352

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