Are R&D companies credit-constrained? Credit frictions during and post-crisis

Private research and development (R&D) and innovation activity is believed to fall below the socially optimal level. The credit constraints that R&D companies face due to asymmetric information and credit market imperfections may hinder innovation. This descriptive analysis aims to provide a comparative insight into the credit demand and supply patterns of R&D and non-R&D companies in Central and Eastern European countries during and after the Global Financial Crisis. The study uses company-level data from rounds IV and V of the Business Environment and Enterprise Performance Survey, covering the years 2007-2009 and 2012-2014. It reveals that the dependence of R&D companies on bank credit dropped significantly over the two survey rounds, mirroring substantial self-selection into R&D, with a smaller number of able and well-capitalised companies continuing R&D activity after the crisis. We do not subsequently find convincing evidence that R&D firms that remained in business after the crisis are notably credit-constrained.