Abstract U.S. firms have reduced their investment in scientific research ("R") compared to product development ("D …"), raising questions about the returns to each type of investment, and about the reasons for this shift. We use Census data that … disaggregates "R" from "D" to study how US firms adjust their innovation investments in response to an external increase in funding …

We document that monetary policy has a substantial impact on innovation activities. After a tightening shock of 100 … basis points, research and development (R&D) spending declines by about 1 to 3 percent and venture capital (VC) investment …-based aggregate innovation index, declines by up to 9 percent in the following 2 to 4 years. Based on previous estimates of the …