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Research And Development In Small And Medium‐Sized Enterprises: The Role Of Financial Constraints And Public Funding


  • Dirk Czarnitzki


This paper presents microeconometric evidence on financing constraints for research and development activities in German small‐ and medium‐sized firms (SME). Special attention is paid to the role of public research and development (R&D) subsidies. For this purpose SMEs in West and East Germany are compared because these regions are very different in their supply of public R&D funding. The empirical evidence suggests that West German SMEs are financially constrained in their R&D activities by both internal and external resources. In East Germany, firms are not sensitive to external constraints, possibly due to high public R&D subsidies. The results show that R&D in East Germany is to a large extent driven by public subsidies and that the usual financial market mechanisms are dysfunctional with respect to R&D in this region.

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  • Dirk Czarnitzki, 2006. "Research And Development In Small And Medium‐Sized Enterprises: The Role Of Financial Constraints And Public Funding," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(3), pages 335-357, July.
  • Handle: RePEc:bla:scotjp:v:53:y:2006:i:3:p:335-357
    DOI: 10.1111/j.1467-9485.2006.00383.x

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    1. Bronwyn H. Hall, 1990. "The Manufacturing Sector Master File: 1959-1987," NBER Working Papers 3366, National Bureau of Economic Research, Inc.
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