Impact of Financial Constraints on Innovation: What Can Be Learned From a Direct Measure?

Savignac, Frédérique

doi:10.1080/10438590701538432

Cited by 321 publications

(160 citation statements)

References 39 publications

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“…Canepa and Stoneman 2007;Savignac 2008;Czarnitzki and Hottenrott 2011;Lahr and Mina 2013). While representing an important source of extra-information -such as the distinction between the difficulties of access to finance and the cost of finance -and being free from the biases affecting the indirect measures, 6 these direct measures are not free from limitations (Savignac 2008).…”

Section: Financing Intangible Vs Tangible Investments: 'Taking Diffementioning

confidence: 95%

“…More recently, the development and spread of innovation surveys at the company level, in particular the Community Innovation Survey (CIS) of the EU, have offered the use of direct (self-reported) measurements of the presence of financing constraints rather than proxies such as cash-flow sensitivities (e.g. Canepa and Stoneman 2007;Savignac 2008;Czarnitzki and Hottenrott 2011;Lahr and Mina 2013). While representing an important source of extra-information -such as the distinction between the difficulties of access to finance and the cost of finance -and being free from the biases affecting the indirect measures, 6 these direct measures are not free from limitations (Savignac 2008).…”

Section: Financing Intangible Vs Tangible Investments: 'Taking Diffementioning

confidence: 99%

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Financing constraints, R&D investments and innovative performances: new empirical evidence at the firm level for Europe

Hall

Moncada-Paternò-Castello

Montresor

et al. 2015

Economics of Innovation and New Technology

244

118

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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

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Section: Financing Intangible Vs Tangible Investments: 'Taking Diffementioning

confidence: 95%

Section: Financing Intangible Vs Tangible Investments: 'Taking Diffementioning

confidence: 99%

Financing constraints, R&D investments and innovative performances: new empirical evidence at the firm level for Europe

Hall

Moncada-Paternò-Castello

Montresor

et al. 2015

Economics of Innovation and New Technology

244

118

View full text Add to dashboard Cite

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“…The sources of this information are the successive editions of the EU Industrial R&D Investment Scoreboards (2004-2008 conducted by the Joint Research Centre-Institute for Prospective Technical Studies (JRC-IPTS) of the European Commission (European Commission, 2009). This source is matched with the Compustat database (2009) gathering financial information, including the cash flow of the firms.…”

Section: Financing Constraints and Randd Investments Of Large Corporatimentioning

confidence: 99%

Financing constraints and R&D investments of large corporations in Europe and the US

Cincera

Ravet

2010

Sci. and Pub. Pol.

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This paper explores the existence and importance of financing constraints for R&D investments in large EU and US manufacturing companies over the period [2000][2001][2002][2003][2004][2005][2006][2007]. The main results obtained by estimating error-correction equations suggest that the sensitivity of R&D investments to cash flow variations are important for European firms while US firms do not appear to be financially constrained. In terms of policy implications, these results suggest improving the conditions for access to external capital to finance R&D activities in the EU.HE EXISTENCE OF CAPITAL MARKET imperfections such as asymmetric information between lenders and borrowers affects the capital investment decisions of a firm and introduces possible financing constraints, i.e. credit rationing by lenders. Such constraints may actually be even more pronounced in the case of intangible investments such as R&D since these activities are more risky by nature and typically provide less collateral to lenders than do capital goods. Based on a representative sample of worldwide firms active in R&D activities over the recent period, this study aims to assess the existence and importance of financing constraints on the R&D investments of firms. In particular, the differences in the extent to which these constraints differ across firms between the EU and the US are examined.The empirical analysis is based on a consolidated sample of large R&D active companies in the manufacturing and services sectors. The sources of this information are the successive editions of the EU Industrial R&D Investment Scoreboards (2004)(2005)(2006)(2007)(2008) conducted by the Joint Research Centre-Institute for Prospective Technical Studies (JRC-IPTS) of the European Commission (European Commission, 2009). This source is matched with the Compustat database (2009) gathering financial information, including the cash flow of the firms. The final sample used in the empirical analysis consists of an unbalanced panel of 1,962 firms over 2000-2007which is representative of about 80% of all R&D carried out in the private sector worldwide. All variables are presented using constant exchange rates and prices and R&D stocks are constructed for each firm on the basis of the perpetual inventory method (Griliches, 1979).The model used to identify the potential liquidity of the constraints of the firms is an error-correction model (ECM) for R&D investment. This model is derived from the optimal level of R&D investment when considering a constant elasticity of substitution (CES) production function of a profit-maximising firm. Financing constraints are measured by the sensitivity of R&D investment decisions to cash flow, assuming that investments of firms that face liquidity constraints are more likely to be sensitive to the availability of internal finance.This model is estimated using econometric methods for panel data. Traditional fixed-effect estimators T Michele Cincera (corresponding author) and Julien Ravet are at the Solvay Brussels

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“…Several studies show that the likelihood of innovation decreases as the firm faces financial constraints (e.g. Savignac (2008)). …”

Section: Brief Overview Of the Literaturementioning

confidence: 99%

Financial Constraints: State Aid to the Rescue? Empirical Evidence from Belgian Firm-Level Data

Sergant

Cayseele

2018

J Ind Compet Trade

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This paper investigates the relationship between State aid measures, as defined by Article 107 of the Treaty on the Functioning of the European Union (TFEU), and firm performance in terms of total factor productivity (TFP). Under imperfect capital markets, firms might encounter difficulties in accessing sufficient resources to fund their optimal investment plans. The main focus of this paper lies in establishing whether State aid alleviates a firm from such constraints, and thereby enhances its productivity. To this end, we include all State aid cases that were active in Belgian manufacturing between 2003 and 2012. To determine the effects of State aid and financing constraints on performance, we first estimate TFP and classify firms according to their financial health in the absence of aid. The main results confirm the hypothesis, but when allowing for firm heterogeneity, a mitigating role for State aid is only present for initially well-performing firms.

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Impact of Financial Constraints on Innovation: What Can Be Learned From a Direct Measure?

Cited by 321 publications

References 39 publications

Financing constraints, R&D investments and innovative performances: new empirical evidence at the firm level for Europe

Financing constraints, R&D investments and innovative performances: new empirical evidence at the firm level for Europe

Financing constraints and R&D investments of large corporations in Europe and the US

Financial Constraints: State Aid to the Rescue? Empirical Evidence from Belgian Firm-Level Data

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