Was there an expectation that economic busts drove innovation? Am I naive to think booms not busts would be the engine for innovation?
replies(6):
The hypothesis was that firms invest in innovation in busts, when the opportunity cost is lower.
The study finds that it’s nuanced and it depends on the industry. Too close to a boom, like an oil firm, and you face high opportunity costs, and innovate less during the boom. There is a sweet spot where you are near enough to benefit from higher capital but not too close to be crippled by opportunity costs