The sensitivity of innovation activities with respect to the business cycle is often assumed to be small. In this paper … the hypothesis on cyclical dependence of innovation activities is tested for firms in the German manufacturing, and … additionally for SMEs. To this end firms? innovation decisions are considered. The decision to innovate in one period is modelled …

innovation is a crucial productivity driver, a potential crowding out of inventive efforts could increase the cost of mitigating …. However, we do not find negative effects on the number of ongoing R&D projects, investments in innovation-related fixed assets … or on the outcome of innovation projects. Likewise, for firms with subsidy-backed environmental innovations no crowding …