Abstract
ABSTRACT This paper investigates trends in intangibles investment since the onset of the COVID-19 pandemic in the United Kingdom. Responses from an online survey show that investment in R&D has dropped substantially for many firms but that over 40% of firms increased their ICT investment, which is likely to reflect the need to facilitate remote working and customer engagement. Industry is a major predictor of the change in intangibles investment. This is consistent with expectations in light of the different effect that measures to contain the pandemic have had across industries.
Highlights
The COVID-19 pandemic has had profound effects on the world economy (International Monetary Fund 2021)
Since their wages account for a high proportion of research and development (R&D) investment, this suggests that R&D investment may be less respon sive to the business cycle (Hall and Lerner 2010)
Strong evidence that R&D investment has decreased during the pandemic, which is likely to have serious repercussions for productivity growth in the medium to longer-term
Summary
The COVID-19 pandemic has had profound effects on the world economy (International Monetary Fund 2021). The effect of recessions on intangibles invest ment is theoretically ambiguous. The knowledge embedded in the human capital of R&D workers and the length of time of R&D pro jects creates a disincentive for firms to make R&D workers redundant. Since their wages account for a high proportion of R&D investment, this suggests that R&D investment may be less respon sive to the business cycle (Hall and Lerner 2010). The empirical evidence is generally supportive of a pro-cyclical relationship (Barlevy 2007; Filippetti and Archibugi 2011; Fabrizio and Tsolmon 2013) and cross-country data shows that intangibles investment declined more than tangibles invest ment in Europe during the Great Recession (Roth 2020). Since the recession caused by COVID-19 is unique, both in its origins and policy response from government, the conclusions from previous studies may not apply
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
