Endogenous Financial Constraints and Innovation
Industrial and Corporate Change, https://doi.org/10.1093/icc/dtaa035
49 Pages Posted: 27 Jan 2019 Last revised: 5 Nov 2020
Date Written: December 15, 2018
Abstract
We investigate which indicators of a firm’s innovation activities are associated with financial constraints and analyse the nature and direction of causal links between innovation and financial constraints. By estimating simultaneous bivariate probit models on data from the UK Innovation Surveys, we show that among innovation inputs, R&D activity increases the likelihood that firms face financial constraints while innovation outputs in the form of new-to-market products seem to generate financial constraints. Reverse effects on innovation appear limited to external R&D.
Keywords: Innovation; Financial Constraints; R&D; Intangible Investment
JEL Classification: D92; E22; G32; O31; O32
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