Employment protection legislation and R&D investment

This paper examines how employment protection legislation influences corporate R&D investment. With a sample of 113,228 observations across 23 OECD countries from 2001 to 2018, I document that firms in strong employment protection legislation have lower R&D expenditure and investment efficiency. In addition, I find that the effect of employment protection on R&D expenditure is stronger in financially constrained firms but the effect of employment protection on R&D investment efficiency is stronger in financially unconstrained firms.

Automated summary

This paper examines the impact of employment protection legislation on corporate R&D investment using a sample of 113,228 observations from 23 OECD countries between 2001 and 2018. The findings suggest that firms operating under strong employment protection regulations have lower R&D expenditure and investment efficiency. Furthermore, the effect of employment protection on R&D expenditure is more pronounced for financially constrained firms, while the effect on R&D investment efficiency is more significant for financially unconstrained firms.