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Microeconometric Evidence of Financing Frictions and Innovative Activity

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Listed:
  • Amaresh K. Tiwari
  • Pierre Mohnen
  • Franz Palm
  • Sybrand Schim van der Loeff

Abstract

Using Dutch data we empirically investigate how financing and innovation vary across firm characteristics. We find that when firms face financial constraints, debt financing and innovation choices are not independent of firm characteristics, and R&D slows down. In the absence of financial constraints, however, as they raise debt, firms become less inclined to innovate and the change in the propensity to innovate no longer varies with firm characteristics. We find that financing constraints faced, propensity to innovate, and R&D intensity are not uniform across firm characteristics. A new “control function” estimator to account for heterogeneity and endogeneity has been developed.
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Suggested Citation

  • Amaresh K. Tiwari & Pierre Mohnen & Franz Palm & Sybrand Schim van der Loeff, 2012. "Microeconometric Evidence of Financing Frictions and Innovative Activity," CIRANO Working Papers 2012s-24, CIRANO.
    • Handle: RePEc:cir:cirwor:2012s-24
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial Constraints; Capital Structure; R&D; Innovation; Firm Dynamics; Market Failure; Panel Data; Correlated Random Effects; Control Function; Expected ´a Posteriori; financières; structure de capital; R-D; innovation; dynamique de firmes; failles de marché; données panel; effets aléatoires corrélés; fonctions de contrôle; attentes a posteriori.;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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