Innovative investments, financial imperfections, and the Italian business cycle

Daniela Bragoli, Giovanni Marseguerra, Massimiliano Rigon, Flavia Cortelezzi

Research output: Contribution to journalArticle

2 Citations (Scopus)


We analyse empirically the relationship between financial imperfections and firms’ innovative activities over the business cycle, using an Italian firm-level dataset based on survey data on innovation and balance sheet information over the period 2004–10. We explore how innovative investment decisions changed prior to and after the credit crunch of 2008, also focusing on the effect of firm’ financial vulnerability measured by the Whited and Wu (2006) index (WW index). Results show that the link between innovative expenditure patterns and the business cycle is very weak in the absence of credit restrictions and financial vulnerability. The crisis, per se, and the financial vulnerability, per se, do not change this weak relation. The latter becomes highly pro-cyclical only in one case: when firms are financially vulnerable and have to face tight credit conditions.
Original languageEnglish
Pages (from-to)412-434
Number of pages23
JournalOxford Economic Papers
Publication statusPublished - 2020


  • financial imperfections
  • innovation


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