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The impact of financial constraints on innovation: What can be learned from a direct measure?

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  • Savignac, F.

Abstract

This paper examines the impact of financial constraints on innovation for established firms. We make use of a direct measure of the existence of financial constraints obtained thanks to a specific survey addressed to French established firms (FIT, Sessi). This is a distinctive feature of this paper as most of previous studies had to rely on proxies (like the cash-flow sensitivity) which may be subject to interpretation problems. The probability to have innovative activities and the probability to face financial constraints are simultaneously estimated by a recursive bivariate probit model. Accounting for the endogeneity of the financial constraint variable, we find that financial constraints significantly reduce the likelihood that firms have innovative activities. The probability to encounter financial constraints is explained by firms' ex ante financing structure and economic performances.

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Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 169.

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Length: 25 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:bfr:banfra:169

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Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
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Related research

Keywords: Innovation ; Financing constraints ; Recursive bivariate probit.;

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References

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