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The determinants of R&D Investment: the role of Cash flow and Capabilities

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Abstract

In this paper we have estimated a behavioural equation for R&D investment. We assess the impact of liquidity constraints and capabilities, measured respectively as internal cash flow and distance from the technological frontier. Our estimation is performed on an industry level panel covering fifteen European countries from 1996 to 2005 and on a sample of European R&D performers extracted from COMPUSTAT covering 2000-2008. Both at industry level and firm level we found that financing constraints exist and that the distance from the frontier negatively affects the decision to engage in R&D. We claim that the implied divergence pattern opens a gap for policy intervention, but that these policies should be correctly tailored and should also promote enablers of technological change.

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File URL: http://iri.jrc.ec.europa.eu/documents/10180/6461e5df-72a2-4e32-95e6-9015ffaab432
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Bibliographic Info

Paper provided by Institute of Prospective Technological Studies, Joint Research Centre in its series JRC-IPTS Working Papers on Corporate R&D and Innovation with number 2010-10.

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Length: 31 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:ipt:wpaper:201010

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Keywords: R&D; liquidity constraints; technological frontier; panel data;

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References

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  1. Bruno Crépon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation and Productivity : An Econometric Analysis at the Firm Level," Working Papers, Centre de Recherche en Economie et Statistique 98-33, Centre de Recherche en Economie et Statistique.
  2. Raquel Ortega-Argilés & Mariacristina Piva & Lesley Potters & Marco Vivarelli, 2010. "Is Corporate R&D Investment In High-Tech Sectors More Effective?," Contemporary Economic Policy, Western Economic Association International, vol. 28(3), pages 353-365, 07.
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Cited by:
  1. Francesco Bogliacino & Matteo Lucchese, 2011. "Access to finance for innovation: the role of venture capital and the stock market," JRC-IPTS Working Papers on Corporate R&D and Innovation, Institute of Prospective Technological Studies, Joint Research Centre 2011-05, Institute of Prospective Technological Studies, Joint Research Centre.
  2. Afandi, Elvin & Kermani, Majid, 2013. "What Determines Firms’ Innovation in Eastern Europe and Central Asia," MPRA Paper 53255, University Library of Munich, Germany.

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