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The impact of financial constraints on innovation : evidence from French manufacturing firms

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  • Frédérique Savignac

    ()
    (CREST-LMI - Centre de Recherche en Economie et Statistique - Laboratoire de Microéconométrie, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Abstract

This paper examines the impact of financial constraints on innovation for established firms. We make use of a qualitative indicator of the existence of financial constraints based on firms' own assessment obtained thanks to a French specific survey. Thus, the existence of financial constraints for innovation is measured by a direct indicator whereas previous studies rely on proxies (like the cash-flow sensitivity) subject to interpretation problems. The descriptive analysis of balance sheet structures reveals that innovative firms without financial constraints have the best profile in terms of economic performances, financing structure and risk whereas non innovative firms facing financial constraints have the poorest profile. From the econometric point of view, the probabilities of implementing innovative projects and of facing financial constraints are simultaneously estimated by a recursive bivariate probit model to account for the endogeneity of the financial constraint variable. We then find that firms having innovative projects face financial constraints that significantly reduce the likelihood that they implement their innovative investment. The probability of facing financing constraints is explained by firms' ex ante financing structure and economic performances, by industry sector and it decreases with firms' size.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00115717.

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Date of creation: Apr 2006
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Handle: RePEc:hal:cesptp:halshs-00115717

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Keywords: Innovation; financing constraints; recursive bivariate probit.;

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Citations

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Cited by:
  1. Sybrand Schim van der Loeff & Pierre Mohnen & Franz Palm & Amaresh K. Tiwari, 2008. "Financial Constraints and other Obstacles: Are they a Threat to Innovation Activity?," CESifo Working Paper Series 2204, CESifo Group Munich.
  2. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2008. "Financial constraints as a barrier to export participation," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2008-29, Observatoire Francais des Conjonctures Economiques (OFCE).
  3. Pietro Alessandrini & Andrea Filippo Presbitero & Alberto Zazzaro, 2008. "Geographical Organization of Banking Systems and Innovation Diffusion," Mo.Fi.R. Working Papers, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences 3, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  4. Vassilis Hajivassiliou & Frédérique Savignac, 2007. "Financing constraints and a firm's decision and ability to innovate: establishing direct and reverse effects," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 4774, London School of Economics and Political Science, LSE Library.
  5. Patrick Musso & Stefano Schiavo, 2007. "The Impact of Financial Constraints on Firms Survival and Growth," Sciences Po publications 2007-37, Sciences Po.
  6. repec:spo:wpecon:info:hdl:2441/9797 is not listed on IDEAS
  7. Mohnen, Pierre & Tiwari, Amaresh & Palm, Franz & Schim van der Loeff, Sybrand, 2007. "Financial Constraint and R&D Investment: Evidence from CIS," MERIT Working Papers, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) 011, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  8. Pietro Alessandrini & Andrea Filippo Presbitero & Alberto Zazzaro, 2008. "Bank Size or Distance: What Hampers Innovation Adoption by SMEs?," Mo.Fi.R. Working Papers, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences 2, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  9. D’Este, Pablo & Iammarino, Simona & Savona, Maria & von Tunzelmann, Nick, 2012. "What hampers innovation? Revealed barriers versus deterring barriers," Research Policy, Elsevier, Elsevier, vol. 41(2), pages 482-488.

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