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R&D and Firm Performance in a Transition Economy

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  • Dirk Czarnitzki
  • Kornelius Kraft

Abstract

We estimate the effects of R&D on firms' credit ratings and on financial distress. The main purpose is the comparison of firms in Western Germany and Eastern Germany as a transitional economy. Innovative activity has a positive impact on firm value proxied by ratings in Western Germany, but a negative impact in Eastern Germany. We also consider future financial distress, and find that R&D in Eastern German firms leads to higher default risk. This stands in contrast to Western Germany where R&D enhances future performance. This result is highly politically relevant, since the high level of subsidies present in Eastern Germany may be subject to misallocation.

Suggested Citation

  • Dirk Czarnitzki & Kornelius Kraft, 2006. "R&D and Firm Performance in a Transition Economy," Kyklos, Wiley Blackwell, vol. 59(4), pages 481-496, November.
  • Handle: RePEc:bla:kyklos:v:59:y:2006:i:4:p:481-496
    DOI: 10.1111/j.1467-6435.2006.00346.x
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    1. Almus, Matthias & Czarnitzki, Dirk, 2003. "The Effects of Public R&D Subsidies on Firms' Innovation Activities: The Case of Eastern Germany," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(2), pages 226-236, April.
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    8. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
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    13. Zoran Aralica & Katarina Bacic, 2005. "Evaluation of Croatian innovation capability," Chapters in books, in: Katarina Ott (ed.), Croatian Accession to the European Union: Facing the Challenges of Negotiations, volume 3, chapter 6, pages 129-159, Institute of Public Finance.
    14. Marianne Paasi, 2000. "Restructuring the Innovation Capacity of the Business Sector in Estonia: Business Survey Result," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(1), pages 175-195, March.
    15. Jozef Konings & Ana Xavier, 2002. "Firm Growth and Survival in a Transition Country: Micro Evidence from Slovenia," LICOS Discussion Papers 11402, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    16. Czarnitzki, Dirk & Kraft, Kornelius, 2004. "Innovation indicators and corporate credit ratings: evidence from German firms," Economics Letters, Elsevier, vol. 82(3), pages 377-384, March.
    17. Philippe Aghion & Wendy Carlin & Mark Schaffer, 2002. "Competition, Innovation and Growth in Transition: Exploring the Interactions between Policies," William Davidson Institute Working Papers Series 501, William Davidson Institute at the University of Michigan.
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    Citations

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    Cited by:

    1. Charles S. Maier, 2010. "The Travails of Unification: East Germany's Economic Transition since 1989," WIDER Working Paper Series wp-2010-060, World Institute for Development Economic Research (UNU-WIDER).
    2. Hussinger, Katrin & Wastyn, Annelies, 2011. "In search for the not-invented-here syndrome: The role of knowledge sources and firm success," ZEW Discussion Papers 11-048, ZEW - Leibniz Centre for European Economic Research.
    3. Andreas Ziegler, 2008. "Disentangling Specific Subsets of Innovations : A Micro-Econometric Analysis of their Determinants," CER-ETH Economics working paper series 08/100, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    4. Dirk Czarnitzki & Katrin Hussinger & Cédric Schneider, 2015. "R&D Collaboration with Uncertain Intellectual Property Rights," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(2), pages 183-204, March.
    5. Eleimon Gonis & Salima Paul & Jon Tucker, 2012. "Rating or no rating? That is the question: an empirical examination of UK companies," The European Journal of Finance, Taylor & Francis Journals, vol. 18(8), pages 709-735, September.
    6. Woo Sung Kim & Kunsu Park & Sang Hoon Lee & Hongyoung Kim, 2018. "R&D Investments and Firm Value: Evidence from China," Sustainability, MDPI, vol. 10(11), pages 1-17, November.
    7. Cuijpers, Maarten & Guenter, Hannes & Hussinger, Katrin, 2011. "Costs and benefits of inter-departmental innovation collaboration," Research Policy, Elsevier, vol. 40(4), pages 565-575, May.
    8. Grimpe, Christoph & Hussinger, Katrin, 2009. "Inventions under siege? The impact of technology competition on licensing," ZEW Discussion Papers 09-039, ZEW - Leibniz Centre for European Economic Research.
    9. Hussinger, Katrin & Dick, Johannes M.H. & Czarnitzki, Dirk, 2018. "Ownership concentration and innovativeness of corporate ventures," Research Policy, Elsevier, vol. 47(2), pages 527-541.
    10. Anja Schmiele, 2012. "Drivers for international innovation activities in developed and emerging countries," The Journal of Technology Transfer, Springer, vol. 37(1), pages 98-123, February.

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    More about this item

    JEL classification:

    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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