Indirect ICT Investment

The paper analyzes the existence and impact of …nancing constraints as a possibly serious obstacle to innovation by …rms. Direct measures of …nancing constraints are employed using survey data collected by the Banque de France and the European Commission, which overcomes the problems with the traditional approach of trying to deduce the existence and impact of …nancing constraints through the significance of …rm wealth variables. The econometric framework employed for this study is the simultaneous bivariate probit with mutual endogeneity. The paper discusses the important identi…cation issue of coherency conditions in such LDV models with endogeneity and ‡exible temporal and contemporaneous correlations in the unobservable error terms. Conditions for coherency as discussed in the existing literature are reviewed and shown to be rather esoteric. Two novel methods for establishing coherency conditions are presented, which have intuitive interpretations. Finally, the paper presents alternative approaches for achieving coherency in models hitherto clas-si…ed as incoherent through the use of prior sign restrictions on model parameters. This allows us to obtain estimates of the interaction between …nancing constraints and a …rm's decision and ability to innovate without forcing the econometric models to be recursive. Thus, direct as well as reverse interaction e¤ects are obtained for the …rst time.

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Indirect ICT Investment

Cited by 28 publications

References 125 publications

Access to New Imported Varieties and Total Factor Productivity: Firm Level Evidence from France

Access to New Imported Varieties and Total Factor Productivity: Firm Level Evidence from France

Stress Testing and Corporate Finance

Financing Constraints and a Firm's Decision and Ability to Innovate: Establishing Direct and Reverse Effects

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