Dr. Pietro Grandi Studies Link Between Adverse Funding Conditions and Investment in R&D in Small Business Economics Article

Investment in private research and development (R&D) has long been recognized as a key driver of productivity and growth for businesses. In a recent article published by Small Business Economics, Brattle Associate Dr. Pietro Grandi and his coauthors examine how adverse funding conditions may impact those investments, particularly for companies that are young and small in size.

Specifically, the authors use R&D info from over 25,000 French small and medium-sized enterprises (SMEs) to see if they scaled back R&D activity during the European sovereign debt crisis from 2010 to 2012. They found that – when facing higher borrowing costs and limited access to bank credit – firms were likely to scale back R&D investments during that period, particularly in fundamental research. The authors suggest that public support to R&D for small and young firms is important, especially during financial crises, to drive technological innovation and economic growth.

The full article, “SMEs, R&D financing, and credit shocks,” is available below.