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Innovation and the Financial Performance of Firms during the Great Recession and Recovery Period

Author

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  • Nelson Gomes

    (Univ Coimbra, CeBER, Faculty of Economics)

  • Nuno Gonçalves

    (Univ Coimbra, Faculty of Economics)

Abstract

This study analyzes the relationship between innovation and financial constraints. To this end, a database extracted from the Community Innovation Survey (CIS) and the System of Business Accounts (SCIE) was used. The sample consisted of 24,679 active companies operating in Portugal in the manufacturing and service industry between 2008 and 2016. A Recursive Bivariate Probit Model (RPBM) was used for making estimates. When analyzing the relationship between innovation and financial constraints, the results reveal a negative relationship between the two, confirming that firms that are financially constrained are more limited in their investments in R&D, and innovation is less accessible to them. The severity of the effects of financial constraints is heterogeneous across economic activities, strongly affecting innovative industries, while service industries appear to be the least affected. It was also observed that larger companies are better able to innovate. There was a positive relationship between innovation and the variables sales and exports, indicating that innovation will positively affect the financial results of companies.

Suggested Citation

  • Nelson Gomes & Nuno Gonçalves, 2022. "Innovation and the Financial Performance of Firms during the Great Recession and Recovery Period," Notas Económicas, Faculty of Economics, University of Coimbra, issue 55, pages 115-131, December.
    • Handle: RePEc:gmf:journl:y:2022:i:55:p:115:131
    DOI: 10.14195/2183-203X_55_5
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    More about this item

    Keywords

    Innovation; R&D investment; financial constraints; Portugal.;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L00 - Industrial Organization - - General - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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