In this paper we question the idea that the deduction of debt interest is always an effective policy instrument to spur firm investment. We analyze the investment decision in presence of a borrowing constraint on the amount of the debt that the firm can raise. We show that if the debt interest...

We study the impact of R&D and innovation on the use of external numerical flexibility (ENF). R&D and innovation imply both a higher average and a higher volatile productivity. We investigate this ambiguous effect on the firm preference for using ENF in two steps. First, we use a simple model to...

We address theoretically and empirically the impact of R&D and innovation activity (IA) on the use of external numerical flexibility (ENF). We build a firm-sided model showing that a first-order stochastic dominance shift in the productivity distribution function decreases the probability of...

We address theoretically and empirically the impact of R&D and innovation activity (IA) on the use of external numerical flexibility (ENF). We build a firm-sided model showing that a first-order stochastic dominance shift in the productivity distribution function decreases the probability of...