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R&D investment and financing constraints of small and medium-sized firms

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  • Dirk Czarnitzki

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  • Hanna Hottenrott

Abstract

This study tests for financial constraints on R&D investment and how they differ from capital investment. To identify constraints in the access to external capital, we employ a credit rating index. Our models show that internal constraints, measured by mark-ups, are more decisive for R&D than for capital investment. For external constraints, we find a monotonic relationship between the level of constriction and firm size for both types of investment. Thus, external constraints turn out to be more binding with decreasing firm size. On the contrary, we do not find such monotonic relationships for internal constraints. Differentiation by firms? age does not support lower constraints for older firms.
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Suggested Citation

  • Dirk Czarnitzki & Hanna Hottenrott, 2011. "R&D investment and financing constraints of small and medium-sized firms," Small Business Economics, Springer, vol. 36(1), pages 65-83, January.
    • Handle: RePEc:kap:sbusec:v:36:y:2011:i:1:p:65-83
    DOI: 10.1007/s11187-009-9189-3
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    References listed on IDEAS

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    Keywords

    Capital investment; Censored regression models; Financial constraints; Panel data; R&D investment; L26; O31; O32;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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