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Financing Constraints and the Timing of Innovations in the German Services Sector

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  • Martin Kukuk
  • Manfred Stadler

Abstract

Using newly available data at the firm level, this study provides convincing evidence of the importance of financial constraints in explaining the timing of innovations in the German services sector. Based on a dynamic model of firms' optimal R&D behavior under financial constraints, we estimate various versions of an econometric specification of the model with dichotomous innovation data by using a univariate ordered probit model. Our results are consistent with the theoretical view that, because of capital markets imperfections, internal finance should be an important determinant of innovative activities by private firms in the manufacturing sector as well as in the services sector. --

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File URL: http://hdl.handle.net/10.1023/A:1011808116371
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Bibliographic Info

Article provided by Springer in its journal Empirica.

Volume (Year): 28 (2001)
Issue (Month): 3 (September)
Pages: 277-292

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Handle: RePEc:kap:empiri:v:28:y:2001:i:3:p:277-292

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Web page: http://www.springerlink.com/link.asp?id=100261

Related research

Keywords: Innovation; Financial Constraints; Ordinal Regressors; Indirect Inference Estimation;

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References

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  1. Gourieroux, C. & Monfort, A. & Renault, E., 1992. "Indirect Inference," Papers 92.279, Toulouse - GREMAQ.
  2. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  3. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  4. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  5. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
  6. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  7. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  8. Stephen BOND & Dietmar HARHOFF & John VAN REENEN, 2005. "Investment, R&D and Financial Constraints in Britain and Germany," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 433-460.
  9. Veall, Michael R & Zimmermann, Klaus F, 1996. " Pseudo-R-[superscript 2] Measures for Some Common Limited Dependent Variable Models," Journal of Economic Surveys, Wiley Blackwell, vol. 10(3), pages 241-59, September.
  10. Dietmar HARHOFF, 1998. "Are there Financing Constraints for R&D and Investment in German Manufacturing Firms," Annales d'Economie et de Statistique, ENSAE, issue 49-50, pages 421-456.
  11. Himmelberg, Charles P & Petersen, Bruce C, 1994. "R&D and Internal Finance: A Panel Study of Small Firms in High-Tech Industries," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 38-51, February.
  12. Schiantarelli, Fabio, 1996. "Financial Constraints and Investment: Methodological Issues and International Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 70-89, Summer.
  13. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series 82, Board of Governors of the Federal Reserve System (U.S.).
  14. Kamien,Morton I. & Schwartz,Nancy L., 1982. "Market Structure and Innovation," Cambridge Books, Cambridge University Press, number 9780521293853.
  15. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  16. Kukuk, Martin, 1998. "Indirect estimation of linear models with ordinal regressors: A Monte Carlo study and some empirical illustrations," Tübinger Diskussionsbeiträge 155, University of Tübingen, School of Business and Economics.
  17. Flaig, Gebhard & Stadler, Manfred, 1994. "Success Breeds Success. The Dynamics of the Innovation Process," Empirical Economics, Springer, vol. 19(1), pages 55-68.
  18. Michael Devereux & Fabio Schiantarelli, 1990. "Investment, Financial Factors, and Cash Flow: Evidence from U.K. Panel Data," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 279-306 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Bettina Peters, 2005. "Persistence of Innovation: Stylised Facts and Panel Data Evidence," Development and Comp Systems 0511021, EconWPA.
  2. Martin Kukuk & Manfred Stadler, 2005. "Market Structure and Innovation Races, An Empirical Assessment Using Indirect Inference," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 225(4), pages 427-440, July.
  3. Spiros Bougheas & Holger Görg & Eric Strobl, 2003. "Is R & D Financially Constrained? Theory and Evidence from Irish Manufacturing," Review of Industrial Organization, Springer, vol. 22(2), pages 159-174, March.
  4. Filipe Silva & Carlos Carreira, 2010. "Financial constraints: Are there differences between manufacturing and services?," GEMF Working Papers 2010-16, GEMF - Faculdade de Economia, Universidade de Coimbra.
  5. Agnes Bäker & Werner Güth & Kerstin Pull & Manfred Stadler, 2011. "Creativity, Analytical Skills, Personality Traits, and Innovation Game Behavior in the Lab: An Experiment," Jena Economic Research Papers 2011-056, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  6. Güth, Werner & Pull, Kerstin & Stadler, Manfred, 2012. "Creativity, analytical skills, personality traits, and innovative capability: A lab experiment," University of Tuebingen Working Papers in Economics and Finance 44, University of Tuebingen, Faculty of Economics and Social Sciences.
  7. Christian Schröder, 2009. "Financial System and Innovations-Determinants of Early Stage Venture Capital in Europe," Schumpeter Discussion Papers sdp09004, Universitätsbibliothek Wuppertal, University Library.
  8. Christian Schröder, 2009. "Financial System and Innovations: Determinants of Early Stage Venture Capital in Europe," EIIW Discussion paper disbei167, Universitätsbibliothek Wuppertal, University Library.
  9. Filipe Silva & Carlos Carreira, 2009. "No Deep Pockets: Some stylized results on firms' financial constraints," GEMF Working Papers 2009-06, GEMF - Faculdade de Economia, Universidade de Coimbra.

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