GEP 2020/09: R&D restructuring during the Great Recession and young firms

Abstract

In this paper, I provide evidence of automation and skill-upgrading of R&D for young firms during the Great Recession of the late 2000s (henceforth abbreviated as GR). Using a difference-in-difference approach and propensity score matching, for a panel of more than 12,000 Spanish firms from 2005 to 2014, I examine if the GR had an effect on the organization of R&D in young versus older firms. I find that young firms adjust their R&D employment during the GR. I show that young firms implemented three key compositional changes in their R&D policies during the GR as compared to older firms: a) they reduced their R&D employment by firing medium-skilled R&D workers; b) they hired high-skilled R&D workers; and c) they increased their capital investments for R&D. These changes in R&D policies suggest that during the GR, young firms substituted medium-skilled R&D workers by high-skilled workers and machines. These effects are mediated by the firms’ financial health.

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Author

María García-Vega

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