Abstract: Through incorporating short-term investments into the financing constraints and technological opportunities, this paper expands the existing periodical classic model of corporate R&D to examine the effect mechanism of short-term economic fluctuations on corporate R&D behavior in China. Based on the data of China’s listed companies over the period of 2007-2015, it conducts an empirical test on the theoretical propositions by using the mixed multiple regression model and the instrumental variable method. The results show that both the short-term macro-fluctuation and the market demand fluctuation of enterprises have a negative correlation with corporates’ R&D intensity, indicating that corporates’ R&D intensity is countercyclical. The negative relationship between macro-economic fluctuation and corporate R&D intensity mainly appears in the economic prosperity period, while the negative relationship between micro-economic fluctuation and corporate R&D intensity mainly appears in the market recession period. Further study finds out that financing constraints will limit the ability of enterprises to adjust and hence weaken the negative relationship between economic fluctuations and corporate R&D intensity, while stronger technological opportunities have an incentive effect on corporate and thus strengthen the counter cyclicality of corporates’ R&D intensity.

Key words: economic fluctuation; R&D input; opportunity cost effect; financing constraints