Template-Type: ReDIF-Paper 1.0
Author-Name: Sirio Aramonte
Author-X-Name-First: Sirio 
Author-X-Name-Last: Aramonte
Author-Name: Matthew Carl
Author-X-Name-First: Matthew 
Author-X-Name-Last: Carl
Title: Firm-level R&D after periods of intense technological innovation: the role of investor sentiment
Abstract: Following periods of intense technological innovation, R&D is a critical driver of technology diffusion, but it is subject to frictions that can lower it below the level firms would undertake otherwise. We study whether sentiment can counterbalance these frictions and thus strengthen the link between firm-level R&D and lagged aggregate innovation. We find a positive answer for low-tech firms, which represent the main conduit for technology diffusion. The effect is stronger in the presence of informational externalities, that is when the results of experimentation funded by a company are observable by competitors. In contrast to the literature on sentiment and capital expenditures, the effect is weaker for financially constrained firms.
Length: 43 pages
Creation-Date: 2021-01
File-URL: https://www.bis.org/publ/work916.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work916.htm
File-Format: text/html
Number: 916
Keywords: investor sentiment, technological innovation, R&D
Classification-JEL: G02, G31, O32, O33
Handle: RePEc:bis:biswps:916