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Endogenous financial constraints and innovation
[Financial dependence and innovation: the case of public versus private firms]

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  • Henry Lahr
  • Andrea Mina

Abstract

We investigate which indicators of a firm’s innovation activities are associated with financial constraints and analyze the nature and direction of causal links between innovation and financial constraints. By estimating simultaneous bivariate probit models on data from the UK Innovation Surveys, we show that among innovation inputs, research and development (R&D) activity increases the likelihood that firms face financial constraints. Among innovation outputs, only new-to-market products generate financial constraints. Reverse effects on innovation appear limited to external R&D.

Suggested Citation

  • Henry Lahr & Andrea Mina, 2021. "Endogenous financial constraints and innovation [Financial dependence and innovation: the case of public versus private firms]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 30(3), pages 587-621.
    • Handle: RePEc:oup:indcch:v:30:y:2021:i:3:p:587-621.
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    File URL: http://hdl.handle.net/10.1093/icc/dtaa035
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    Cited by:

    1. Emanuele Campiglio & Alessandro Spiganti & Anthony Wiskich, 2023. "Clean innovation and heterogeneous financing costs," Working Papers 2023: 07, Department of Economics, University of Venice "Ca' Foscari".
    2. Dumont, Michel, 2022. "Public support to business research and development in Belgium: fourth evaluation," MPRA Paper 115418, University Library of Munich, Germany.
    3. Alessandro Spiganti, 2020. "Can Starving Start‐ups Beat Fat Labs? A Bandit Model of Innovation with Endogenous Financing Constraint," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 702-731, April.

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