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Financial constraints for R&D and innovation: new evidence from a survey experiment

Author

Listed:
  • Dirk Czarnitzki
  • Marek Giebel

Abstract

We utilize a survey experiment to evaluate the existence and degree of financial constraints for R&D. The experiment not only allows for the deduction of the presence of financial constraints but also for evaluating their economic significance. Using data on German companies, we find that financial constraints exist, but their relevance might have been overestimated in the literature. Most R&D projects that have not been implemented because of financial constraints seem to have low expected marginal rates of return. While this finding contrasts with other studies, we also find results that align with the literature: young firms are most constrained, and the constraints occur at the intensive margin, i.e. our results do not suggest that firms are deterred from innovation. Instead, highly innovative companies are restricted by the capital market. Small firms, in particular, had innovation projects in their portfolios that were not implemented.

Suggested Citation

  • Dirk Czarnitzki & Marek Giebel, 2025. "Financial constraints for R&D and innovation: new evidence from a survey experiment," Applied Economics, Taylor & Francis Journals, vol. 57(56), pages 9495-9515, December.
    • Handle: RePEc:taf:applec:v:57:y:2025:i:56:p:9495-9515
    DOI: 10.1080/00036846.2024.2421455
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • 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
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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