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Innovative capability and financing constraints for innovation: More money, more innovation?

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  • Hottenrott, Hanna
  • Peters, Bettina

Abstract

This study presents a novel empirical approach to identify financing constraints for innovation based on the idea of an ideal test as suggested by Hall (2008). Firms were offered a hypothetical payment and were asked to choose between alternatives of use. If they choose additional innovation projects they must have had some unexploited investment opportunities that were not profitable using more costly external finance. That is, these firms have been financially constrained. We attribute constraints for innovation not only to lacking financing, but also to firms' innovative capability. Econometric results show that financial constraints do not depend on the availability of internal funds perse, but that they are driven by innovative capability. We find firms with high innovative capability but low financial resources to be most likely subject to financing constraints. Yet, we also observe constraints for financially sound firms that may have to put ideas on the shelf. --

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 09-081.

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Date of creation: 2009
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Handle: RePEc:zbw:zewdip:09081

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Keywords: Innovation; financing constraints; innovative capability; multivariate probit models;

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Citations

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Cited by:
  1. Georgios Efthyvoulou & Priit Vahter, 2012. "Financial Constraints, Innovation Performance, and Sectoral Disaggregation," Working Papers 2012030, The University of Sheffield, Department of Economics.
  2. Agenor, Pierre-Richard & Canuto, Otaviano, 2014. "Access to finance, product innovation and middle-income traps," Policy Research Working Paper Series 6767, The World Bank.
  3. Audretsch, David B. & Segarra Blasco, Agustí, 1958- & Teruel, Mercedes, 2014. "Why not all young firms invest in R&D," Working Papers 2072/225296, Universitat Rovira i Virgili, Department of Economics.
  4. Czarnitzki, Dirk & Hall, Bronwyn H. & Hottenrott, Hanna, 2014. "Patents as quality signals? The implications for financing constraints on R&D," ZEW Discussion Papers 14-023, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. José García-Quevedo & Gabriele Pellegrino & Maria Savona, 2014. "Reviving demand-pull perspectives: the effect of demand uncertainty and stagnancy on R&D strategy," Working Papers 2014/11, Institut d'Economia de Barcelona (IEB).
  6. Gabriele Pellegrino & Mark J. Maria Savona, 2013. "Is money all? Financing versus knowledge and demand constraints to innovation," Working Papers 2013/21, Institut d'Economia de Barcelona (IEB).
  7. Fryges, Helmut & Kohn, Karsten & Ullrich, Katrin, 2011. "The Interdependence of R&D Activity and Debt Financing of Young Firms," IZA Discussion Papers 6217, Institute for the Study of Labor (IZA).
  8. Czarnitzki, Dirk & Hottenrott, Hanna, 2012. "Collaborative R&D as a strategy to attenuate financing constraints," ZEW Discussion Papers 12-049, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Rammer, Christian & Köhler, Christian, 2012. "Innovationen, Anlageinvestitionen und immaterielle Investitionen," ZEW Discussion Papers 12-085, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Busom, Isabel & Corchuelo, Beatriz & Martinez Ros, Ester, 2012. "Tax incentives or subsidies for R&D?," MERIT Working Papers 056, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  11. Agénor, Pierre-Richard & Canuto, Otaviano & Jelenic, Michael, 2014. "Access to Finance, Product Innovation, and Middle-Income Growth Traps," World Bank - Economic Premise, The World Bank, issue 137, pages 1-7, March.
  12. Isabel Busom & Beatriz Corchuelo & Ester Martinez Ros, 2012. "Tax incentives and direct support for R&D: What do firms use and why?," Working Papers wpdea1212, Department of Applied Economics at Universitat Autonoma of Barcelona.
  13. Marin,Giovanni & Marzucchi,Alberto & Zoboli,Roberto, 2014. "SMEs and Barriers to Eco-Innovation in EU: A Diverse Palette of Greens," INGENIO (CSIC-UPV) Working Paper Series 201404, INGENIO (CSIC-UPV).
  14. Segarra Blasco, Agustí, 1958- & Gombau, Verònica, 2013. "Young innovative firms and R&D strategies: is the Spanish case different?," Working Papers 2072/222200, Universitat Rovira i Virgili, Department of Economics.
  15. Petrolia, Daniel R. & Hwang, Joonghyun & Landry, Craig E. & Coble, Keith H., 2013. "Wind Insurance and Mitigation in the Coastal Zone," Working Papers 160462, Mississippi State University, Department of Agricultural Economics.
  16. Georg Paula, 2010. "Financing Conditions, the Concept of Innovation Capacity and the Innovative Activity of Firms," CESifo Working Paper Series 3296, CESifo Group Munich.

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