Financial constraints and the failure of innovation projects
AbstractTheoretical and empirical approaches have stressed the existence of financial constraints in innovative activities of firms. This paper analyses the role of financial obstacles on the likelihood of abandoning an innovation project. Although a large number of innovation projects are abandoned before their completion, the empirical evidence has focused on the determinants of innovation while failed projects have received little attention. Our analysis differentiates between internal and external barriers on the probability of abandoning a project and we examine whether the effects are different depending on the stage of the innovation process. In the empirical analysis carried out for a panel data of potential innovative Spanish firms for the period 2004-2010, we use a bivariate probit model to take into account the simultaneity of financial constraints and the decision to abandon an innovation project. Our results show that financial constraints most affect the probability of abandoning an innovation project during the concept stage and that low-technological manufacturing and non-KIS service sectors are more sensitive to financial constraints. Keywords: barriers to innovation, failure of innovation projects, financial constraints JEL Classifications: O31, D21
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Bibliographic InfoPaper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/211807.
Date of creation: 2013
Date of revision:
Innovacions tecnològiques; Conducta organitzacional; 33 - Economia;
Other versions of this item:
- 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.
- 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).
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-16 (All new papers)
- NEP-ENT-2013-06-16 (Entrepreneurship)
- NEP-INO-2013-06-16 (Innovation)
- NEP-KNM-2013-06-16 (Knowledge Management & Knowledge Economy)
- NEP-PPM-2013-06-16 (Project, Program & Portfolio Management)
- NEP-SBM-2013-06-16 (Small Business Management)
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