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R&D, Innovation and Liquidity Constraints

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Author Info

  • Maria Luisa Mancusi

    ()
    (KITeS, Bocconi University, Milan, Italy)

  • Andrea Vezzulli

    ()
    (Department of Management, University of Bologna, Bologna, Italy and KITeS, Bocconi University, Milan, Italy)

Abstract

We study the effect of financing constraints on the decision to do R&D and on the level of R&D investment using survey data and complete financial accounting data on a large number of Italian manufacturing SMEs from 2001 to 2003. We use a direct indicator of credit constraints and employ an econometric approach allowing for the existence of binding financing constraints to be endogenously determined. We find that there is a significantly negative effect on the probability to set up R&D activities due to the presence of financing constraints, ceteris paribus. We also find that ignoring the endogeneity of the financing constraints indicator and the sample selection originating from firms not interested in doing R&D induces a bias in the estimated effect, which turns out to be positive and significant. We find the same result when studying the effect of liquidity constraints on R&D spending and are able to show that its reduction of liquidity constraints is largely to be associated with the reduction in the likelihood to do R&D (the R&D participation decision), rather than with a reduced level of investment. Finally, but importantly, firms that are both young and small appear to have additional difficulties in obtaining financing - even after controlling for both size and age - and disply a higher probability of being subject to credit constraints, ceteris paribus.

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Bibliographic Info

Paper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 030.

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Length: 34 pages
Date of creation: May 2010
Date of revision: May 2010
Handle: RePEc:cri:cespri:kites30_wp

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Web page: http://www.kites.unibocconi.it/

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Related research

Keywords: R&D; financing constraints; bivariate probit; IV Tobit;

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Citations

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Cited by:
  1. José García-Quevedo & Gabriele Pellegrino & Maria Savona, 2014. "Reviving demand-pull perspectives: The effect of demand uncertainty and stagnancy on R&D strategy," SPRU Working Paper Series 2014-09, SPRU - Science and Technology Policy Research, University of Sussex.
  2. Pellegrino, Gabriele & Savona, Maria, 2013. "Is money all? Financing versus knowledge and demand constraints to innovation," MERIT Working Papers 029, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. Marin,Giovanni & Marzucchi,Alberto & Zoboli,Roberto, 2014. "SMEs and Barriers to Eco-Innovation in EU: A Diverse Palette of Greens," INGENIO (CSIC-UPV) Working Paper Series 201404, INGENIO (CSIC-UPV).
  4. Agustí Segarra & José García-Quevedo & Mercedes Teruel, 2013. "Financial constraints and the failure of innovation projects," Working Papers XREAP2013-01, Xarxa de Referència en Economia Aplicada (XREAP), revised Mar 2013.
  5. D'Este,Pablo & Rentocchini,Francesco & Vega Jurado,Jaider M., 2012. "The role of human capital in lowering barriers to engage in innovation: evidence from the Spanish innovation survey," INGENIO (CSIC-UPV) Working Paper Series 201206, INGENIO (CSIC-UPV), revised 03 Aug 2012.
  6. Juan A. Máñez & María E. Rochina-Barrachina & Juan A. Sanchis-Llopis & Oscar Vicente, 2013. "Financial constraints and Spanish manufacturing firms’ R&D and exporting," Working Papers 1324, Department of Applied Economics II, Universidad de Valencia.
  7. Kadri Männasoo & Jaanika Meriküll, 2011. "How do demand fluctations and credit constraints affect R&D? Evidence from Central, Southern and Eastern Europe," Bank of Estonia Working Papers wp2011-09, Bank of Estonia, revised 19 Jul 2011.

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