Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp08047.pdf Non-technical SummaryResearch and development (R&D) activities of firms can be seen as investments in the creation of knowledge. This basic fact makes raising funds for investment in R&D projects different from capital investment. R&D investment is not only characterized by high, sunk, firm-specific investment cost and low collateral value, but also by significant adjustment cost.Further, the creation of positive externalities and uncertainty of returns affect financing conditions for such projects. Hence, firms' R&D activities may be pursued at a sub-optimal level or not conducted at all if financing becomes too expensive or is not available at all.As investment in new knowledge is a crucial factor for the creation of wealth, from a society's point of view potential underinvestment is regarded as justification for government intervention to promote R&D investment. However, in order to design efficient support programs it is crucial to identify potentially constrained firms.This study analyzes both R&D investment and capital investment based on firm-level panel data. Thereby, the effects of internal and external funding resources for both types of investment are compared. A positive reaction of changes in the firms' funding resources is interpreted as an indication of the firms being financially constrained in their investment.Moreover, the models distinguish effects for firms of different size and different age. This allows us to identify attributes affecting the level of constriction for both types of investment.The results show that the availability of internal funds is more decisive for R&D investment than for capital investment. For both types of investment, we find a monotonic relationship between the impact of the constriction and firm size. The smaller the firms are, the more binding are financial constraints. Interestingly, capital investment reacts more sensitive to external constraints than R&D. We believe that this happens due to the fact that R&D is harder to finance through external resources in the first place. This is also reflected by the higher sensitivity of R&D to internal financial resources.When looking at age differences, the relationship between the level of constriction and R&D investment is non-monotonic. For capital investment, we cannot identify differences between different age classes. Das Wichtigste in Kürze (Summary in German) Abstr...

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp09081.pdf Non-technical SummaryEconomic theory suggests that nancing constraints may occur due to capital market imperfections. These particularly aect investments in innovation projects as such projects are typically characterized by a high degree of uncertainty, complexity and specicity.Financing innovation externally is thus likely to be more costly compared to nancing of other investment. Hence, internal sources of nancing are crucial for the implementation of innovation projects. However, internal funds are not inexhaustible either. , then the rm must have had some unexploited investment opportunities that were not protable using more costly external nance'. That is, these rms have been nancially constrained. This study contributes to the literature in the following three main aspects. First, we employ a direct indicator derived from survey information in which rms were oered a hypothetical cash payment. Second, we account for the rm's choice between alternatives of use for the money. Third, we introduce the concept of innovative capability and how it aects nancing constraints for innovation.The results from our econometric analysis show that nancial constraints for innovation do not depend on the availability of funds per se, but are driven by innovative capability through increasing resource requirements. That is, rms with high innovative capability but low nancial resources are more likely constrained than others. Yet, we also observe constraints for nancially sound rms that may have to put some of their ideas on the shelf. Firms with low innovative capability choose other options, such as investment in physical capital. Taking account of all options for usage of the additional money, we further nd in contrast to the innovation decision, the decision to serve debt is to a large extent driven by the nancial background. Firms with low internal funds or a bad credit rating would primarily repay debt instead of investing additional cash in innovation projects. Abstract: This study presents a novel empirical approach to identify nancing constraints for innovation based on the idea of an ideal test as suggested by Hall (2008). Firms were oered a hypothetical payment and were asked to choose between alternatives of use. If they choose additional innovation projects they must have had some unexploited investment opportunities that were not protable using more costly external...

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp10105.pdf Non-Technical SummaryResearch conducted by university researchers for industry constitutes one of the main channels through which knowledge and technology are transferred from science to the private sector. Since the value of such inputs for the innovation performance of firms has been found to be considerable, it is not surprising that firms increasingly seek direct access to university knowledge. In particular, industry funding for public sector R&D has been steadily increasing in most OECD countries.The growing amount of industry funded research, however, spurs concerns regarding Previous research has provided little empirical evidence on the effects of industry funding for university research on scientific productivity at the level of the individual researcher.This study aims at filling this gap by studying the effects of industry sponsoring on professors' scientific productivity. Our data contains information on laboratory and funding characteristics as well as on publication and patent output for 678 professors at 46 different universities in Germany covering a broad range of research fields in science and engineering. The results show that a higher budget share from industry reduces the publication output of professors in terms of both quantity and quality in subsequent years.In turn, industry funding has a positive impact on the quality of applied research if measured by patent citations. Industry funding may thus still have beneficial effects by improving impact and quality of more applied research.We believe the results from this study are provocative for policy analysis and public funding authorities. An increasing reliance on industry funding compared to stagnating core funding may indeed affect the development of science in the long run if publication output is reduced. On the other hand, industry funding may be very valuable for professors' applied research and the success of their patenting activities. Das Wichtigste in Kürze AbstractUniversity research provides valuable inputs to industrial innovation. It is therefore not surprising that private sector firms increasingly seek direct access through funding public R&D. This development, however, spurred concerns about possible negative long-run effects on scientific performance. While previous research has mainly focused on a potential crowding-out of scientific publications through commercialization...