The relationship between financing constraints, investments in research and development (R&D) and innovative performances has recently attracted renewed attention in the aftermath of a financial crisis that has led to problems of access to the credit on which innovation activities crucially rely. In spite of past developments in the theoretical analysis and in the data and methodologies for empirical investigation, some issues have remained unexplored to date. In this introduction to the special issue, we examine the contribution of the papers it contains, which provide new conceptualisations and empirical evidence at the firm level for Europe. Most previous research results, which were mainly based on extending models of financing constraints and physical investments to R&D investments, are confirmed, while new insights about this relationship are uncovered, in terms of the structural characteristics of the constrained firms, of the industries in which they operate, of their innovative activities and of the innovation outcomes they achieve. ARTICLE HISTORY

address economic and policy questions related to industrial research and innovation and their contribution to European competitiveness. Mainly aimed at policy analysts and the academic community, these are scientific papers (relevant to and highlighting possible policy implications) and proper scientific publications which are typically issued when submitted to peer-reviewed scientific journals. The working papers are useful for communicating preliminary research findings to a wide audience to promote discussion and feedback.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.

No abstract

This paper provides the first empirical attempt of linking firms' profits and investment in R&D revisiting Knight's (Risk, uncertainty and profit, Hart, Schaffner & Marx, Boston, 1921) distinction between uncertainty and risk. Along with the risky profit-maximising scenario, identifying a second, offsetting, unpredictable bias that leads to heterogeneous returns to R&D investments is crucial to fully understand the drivers of corporate profits. Consistently with the Knightian theory that relates risk to profitability, we model the impact of risk and uncertainty on profits and provide a first empirical attempt to model the effect of ambiguity, a particular type of uncertainty, on R&D returns.