Swallow Poison to Innovate: R&D Investment under Financial Constraints and Competition

The impacts of financing constraints on the quality upgrading of China's agri-food exporters

“…Two empirical exercises are carried out using the “distance to the frontier” framework of Aghion et al (2005) that analyzes competition and innovation. Although both competition and innovation are much broader concepts than the focus of our analysis, quality upgrading is one important form of innovation, and financing constraints and competitive interactions affect firms' optimal innovation strategies (Lin, 2017). The exact specification of the empirical model is as follows:where the subscripts i, d, h and t denote firm, destination, product and year.…”

Competition and R&D Financing: Evidence From the Biopharmaceutical Industry

“…1 Additionally, R&D investments require funding to produce innovation, funding that often must be externally financed, given the large scale of such investments. 2 This introduces the influence of competition on the firm's ability to finance, as well as the potential impact of frictions in external financing on the innovation process (e.g., Hall and Lerner (2010), Cornaggia, Mao, Tian, and Wolfe (2015), and Lin (2017)). 3 Thus, competition, innovation, and the financing choices of firms are inextricably linked.…”

“…8 Garfinkel and Hammoudeh (2020) provide recent evidence. Lin (2017) shows theoretically that an increase in competition on existing assets will lead to an increase in innovation. Other authors have also made the point that patentable innovation is one way for firms to protect against profit erosion induced by competition.…”