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Do financial constraints threat the innovation process? Evidence from Portuguese firms

  • Filipe Silva


    (Faculdade de Economia/GEMF, Universidade de Coimbra)

  • Carlos Carreira


    (Faculdade de Economia/GEMF, Universidade de Coimbra)

This paper broadly addresses the financing problems of the innovation process, by analysing the extent to which financial constraints hinder firms' investment in R&D and innovation, as well as investigating the role of public financial support in alleviating such constraints. In order to overcome the problems associated with measuring financial constraints, we make use of both indirect and direct measures of constraints. Our findings suggest that while financial constraints have a perverse effect upon R&D investment and innovation, there is no evidence that subsidies mitigate such constraints. Accordingly, we raise a number of questions regarding the efficiency and effectiveness of subsidies in alleviating firms' financial constraints.

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Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2011-10.

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Length: 50 pages
Date of creation: May 2011
Date of revision: Oct 2011
Publication status: Published in Economics of Innovation and New Technology 21(8): 701-736, 2012.
Handle: RePEc:gmf:wpaper:2011-10
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