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R&D Investment, Credit Rationing And Sample Selection

  • Claudio A. Piga
  • Gianfranco Atzeni

We study whether R&D-intensive firms are liquidity-constrained, by also modeling their antecedent decision to apply for credit. This sample selection issue is relevant when studying a borrower-lender relationship, as the same factors can influence the decisions of both parties. We find firms with no or low R&D intensity to be less likely to request extra funds. When they do, we observe a higher probability of being denied credit. Such a relationship is not supported by evidence from the R&D-intensive firms. Thus, our findings lend support to the notion of credit constraints being severe only for a sub-sample of innovative firms. Furthermore, the results suggest that the way in which the R&D activity is organized may differentially affect a firms’ probability of being credit-constrained.

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Article provided by Wiley Blackwell in its journal Bulletin of Economic Research.

Volume (Year): 59 (2007)
Issue (Month): 2 (04)
Pages: 149-178

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Handle: RePEc:bla:buecrs:v:59:y:2007:i:2:p:149-178
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