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Financial Constraints on Innovation: A European Cross Country Study

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Author Info

  • Stoneman, Paul

    ()
    (University of Warwick, Warwick Business School)

  • Canepa, Alessandra

    ()
    (University of Warwick, Warwick Business School)

Abstract

In this paper we use responses to the second Community Innovation Survey (CIS II) to investigate the relative importance of finance as a constraint to innovation in Europe and also explore differences across industries, countries and firm sizes in the importance of any finance constraints. The findings are related to theoretical propositions and existing empirical literature. It is found that financial constraints are of more importance than other internal and external factors in terms of impacts on projects not starting, being delayed or postponed. It also shown that in market based systems finance is more of a constraint than in bank based systems, and that riskier, newer industries are more constrained by finance. The results on the importance of firm size are less conclusive

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Bibliographic Info

Paper provided by United Nations University, Institute for New Technologies in its series EIFC - Technology and Finance Working Papers with number 11.

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Date of creation: 2002
Date of revision:
Handle: RePEc:dgr:unutaf:eifc02-11

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Web page: http://www.intech.unu.edu

Related research

Keywords: Innovation; Finance; R&D; Industry;

This paper has been announced in the following NEP Reports:

References

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  1. Hall, Bronwyn H., 1992. "Investment and Research and Development at the Firm Level: Does the Source of Financing Matter?," Department of Economics, Working Paper Series qt5j59j6x3, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. 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.
  3. 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.
  4. Stephen Bond & Julie Elston & Jacques Mairesse & Benoit Mulkay, 1997. "Financial Factors and Investment in Belgium, France, Germany and the UK:A Comparison Using Company Panel Data," NBER Working Papers 5900, National Bureau of Economic Research, Inc.
  5. 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.
  6. Stoneman, Paul, 2001. "Technological Diffusion and the Financial Environment," EIFC - Technology and Finance Working Papers 3, United Nations University, Institute for New Technologies.
  7. Stoneman, Paul, 2001. "Heterogeneity and Change in European Financial Environments," EIFC - Technology and Finance Working Papers 7, United Nations University, Institute for New Technologies.
  8. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  9. Benoit Mulkay & Bronwyn H. Hall & Jacques Mairesse, 2001. "Firm Level Investment and R&D in France and the United States: A Comparison," Economics Papers 2001-W2, Economics Group, Nuffield College, University of Oxford.
  10. R. Glenn Hubbard, 1997. "Capital-Market Imperfections and Investment," NBER Working Papers 5996, National Bureau of Economic Research, Inc.
  11. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  12. 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.
  13. 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.
  14. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
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Citations

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Cited by:
  1. Pietro Alessandrini & Andrea Filippo Presbitero & Alberto Zazzaro, 2008. "Bank Size or Distance: What Hampers Innovation Adoption by SMEs?," Mo.Fi.R. Working Papers 2, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Hanna Hottenrott & Bettina Peters, 2012. "Innovative Capability and Financing Constraints for Innovation: More Money, More Innovation?," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1126-1142, November.
  3. Agustí Segarra & José García-Quevedo & Mercedes Teruel, 2013. "Financial constraints and the failure of innovation projects," Working Papers 2013/11, Institut d'Economia de Barcelona (IEB).
  4. Georgios Efthyvoulou & Priit Vahter, 2012. "Financial Constraints, Innovation Performance, and Sectoral Disaggregation," Working Papers 2012030, The University of Sheffield, Department of Economics.
  5. P. Mohnen & F. Palm & S. Loeff & A. Tiwari, 2008. "Financial Constraints and Other Obstacles: are they a Threat to Innovation Activity?," De Economist, Springer, vol. 156(2), pages 201-214, June.
  6. Morgan, Horatio M., 2013. "Entrepreneurship in the Informal Economy of Latin America and the Caribbean: A conceptual model of the finance-performance nexus," MPRA Paper 49856, University Library of Munich, Germany.
  7. Pietro Alessandrini & Andrea Filippo Presbitero & Alberto Zazzaro, 2008. "Geographical Organization of Banking Systems and Innovation Diffusion," Mo.Fi.R. Working Papers 3, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  8. Tena, Juan de Dios & Tremayne, A.R., 2009. "Modelling monetary transmission in UK manufacturing industry," Economic Modelling, Elsevier, vol. 26(5), pages 1053-1066, September.
  9. Mark Freel, 2007. "Are Small Innovators Credit Rationed?," Small Business Economics, Springer, vol. 28(1), pages 23-35, January.
  10. Savignac, F., 2007. "The impact of financial constraints on innovation: What can be learned from a direct measure?," Working papers 169, Banque de France.
  11. Mohnen, Pierre & Palm, Franz & Schim van der Loeff, Sybrand & Tiwari, Amaresh, 2008. "Financial Constraints and Other Obstacles: Are they a Threat to Innovation Activity?," MERIT Working Papers 006, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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