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Does an oil boom promote firms’ R&D expenditure? Evidence from Ecuador

Does an oil boom promote firms’ R&D expenditure? Evidence from Ecuador The purpose of this paper is to examine how the expansionary phase of a business cycle driven by an exogenous commodity price shock (oil) affects R&D expenditures among Ecuadorian firms.Design/methodology/approachUsing two rounds of the Ecuadorian National Science, Technology and Innovation Activities Survey (ACTI 2012 and 2015) and a data set on gross value added (GVA) by industry, we run a sample correction model applied to a panel data of 1,023 firms from 2009 to 2014.FindingsIn deciding whether to invest in R&D, the higher an industry’s GVA, the lower the predicted probability that firms in that industry would invest. Additionally, R&D investments are not procyclical, and there is marginal evidence that they might actually be countercyclical. These findings are consistent with Schumpeter (1939) and Ouyang (2011) and are likely due to an increased opportunity cost of R&D investment during the oil boom.Originality/valueIn this study, we examine a boom period and not a full business cycle. This boom is driven by an exogenous shock, deviating from much of the current literature, which focuses on endogenously driven business cycles. This paper examines how the oil shock impacted a variety of industries, and not just attractive ones. Additionally, this paper adds to the limited literature around R&D and business cycles in Latin America. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Research The Journal of the Iberoamerican Academy of Management Emerald Publishing

Does an oil boom promote firms’ R&D expenditure? Evidence from Ecuador

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References (45)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1536-5433
DOI
10.1108/mrjiam-11-2018-0889
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to examine how the expansionary phase of a business cycle driven by an exogenous commodity price shock (oil) affects R&D expenditures among Ecuadorian firms.Design/methodology/approachUsing two rounds of the Ecuadorian National Science, Technology and Innovation Activities Survey (ACTI 2012 and 2015) and a data set on gross value added (GVA) by industry, we run a sample correction model applied to a panel data of 1,023 firms from 2009 to 2014.FindingsIn deciding whether to invest in R&D, the higher an industry’s GVA, the lower the predicted probability that firms in that industry would invest. Additionally, R&D investments are not procyclical, and there is marginal evidence that they might actually be countercyclical. These findings are consistent with Schumpeter (1939) and Ouyang (2011) and are likely due to an increased opportunity cost of R&D investment during the oil boom.Originality/valueIn this study, we examine a boom period and not a full business cycle. This boom is driven by an exogenous shock, deviating from much of the current literature, which focuses on endogenously driven business cycles. This paper examines how the oil shock impacted a variety of industries, and not just attractive ones. Additionally, this paper adds to the limited literature around R&D and business cycles in Latin America.

Journal

Management Research The Journal of the Iberoamerican Academy of Management – Emerald Publishing

Published: Jun 1, 2020

Keywords: Innovation; Oil price; Business cycle; Ecuador; R&D expenditure; Countercyclical; Ciclo económico; Ecuador; Gasto en I+D; Innovación; Contracíclico; Ciclo de negócios; Equador; gastos em P and D; inovação; contracíclico; D22; E32; M21; O12; O31; O54

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