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Is money all? Financing versus knowledge and demand constraints to innovation

  • Gabriele Pellegrino

    ()

    (University of Barcelona & IEB)

  • Mark J. Maria Savona

    ()

    (University of Sussex)

The paper adds to the scattered empirical evidence on the role of obstacles to innovation in a three-fold way. First, we correct for the usual sample selection bias by filtering out firms not interested in innovation from ‘potential innovators’. Second, we assess what mostly affects firms’ propensity to realize innovative outputs. Third, we do so in a panel framework by using an unbalanced panel of UK firm for the period 2002 - 2010. We find that demand- and market-related factors are as important as financing conditions in determining firms’ innovation failures. This evidence puts much of the latest hype on finance in perspective.

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File URL: http://www.ieb.ub.edu/phocadownload/documentostrabajo/doc2013-21.pdf
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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2013/21.

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Length: 38 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:ieb:wpaper:2013/6/doc2013-21
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  1. Bronwyn H. Hall, 2002. "The Financing of Research and Development," NBER Working Papers 8773, National Bureau of Economic Research, Inc.
  2. Simona Iammarino & Francesca Sanna-Randaccio & Maria Savona, 2007. "The perception of obstacles to innovation. Multinational and domestic firms in Italy," Working Papers of BETA 2007-12, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  3. Galende, Jesus & de la Fuente, Juan Manuel, 2003. "Internal factors determining a firm's innovative behaviour," Research Policy, Elsevier, vol. 32(5), pages 715-736, May.
  4. Baldwin, John & Lin, Zhengxi, 2002. "Impediments to advanced technology adoption for Canadian manufacturers," Research Policy, Elsevier, vol. 31(1), pages 1-18, January.
  5. Hottenrott, Hanna & Peters, Bettina, 2009. "Innovative capability and financing constraints for innovation: More money, more innovation?," ZEW Discussion Papers 09-081, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Mohnen,Pierre & Roeller,Lars-Hendrik, 2003. "Complementarities in Innovation Policy," Research Memorandum 025, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  7. Jacques Mairesse & Pierre Mohnen, 2002. "Accounting for Innovation and Measuring Innovativeness: An Illustrative Framework and an Application," American Economic Review, American Economic Association, vol. 92(2), pages 226-230, May.
  8. Schiantarelli, Fabio, 1996. "Financial Constraints and Investment: Methodological Issues and International Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 70-89, Summer.
  9. Giulio Cainelli & Rinaldo Evangelista & Maria Savona, 2006. "Innovation and economic performance in services: a firm-level analysis," Cambridge Journal of Economics, Oxford University Press, vol. 30(3), pages 435-458, May.
  10. Agustí Segarra-Blasco & José García-Quevedo & Mercedes Teruel-Carrizosa, 2007. "Barriers to Innovation and Public Policy in Catalonia," Working Papers XREAP2007-10, Xarxa de Referència en Economia Aplicada (XREAP), revised Nov 2007.
  11. Mohnen, Pierre & Rosa, Julio, 2001. "Les obstacles à l’innovation dans les industries de services au Canada," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(2), pages 231-254, juin.
  12. Pierre Blanchard & Jean-Pierre Huiban & Antonio Musolesi & Patrick Sevestre, 2013. "Where there is a will, there is a way? Assessing the impact of obstacles to innovation," Industrial and Corporate Change, Oxford University Press, vol. 22(3), pages 679-710, June.
  13. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  14. Galia, Fabrice & Legros, Diego, 2004. "Complementarities between obstacles to innovation: evidence from France," Research Policy, Elsevier, vol. 33(8), pages 1185-1199, October.
  15. Mohnen, Pierre & Tiwari, Amaresh & Palm, Franz & Schim van der Loeff, Sybrand, 2007. "Financial Constraint and R&D Investment: Evidence from CIS," MERIT Working Papers 011, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  16. Piva, Mariacristina & Vivarelli, Marco, 2006. "Is Demand-Pulled Innovation Equally Important in Different Groups of Firms?," IZA Discussion Papers 1982, Institute for the Study of Labor (IZA).
  17. Frederique Savignac, 2008. "Impact Of Financial Constraints On Innovation: What Can Be Learned From A Direct Measure?," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 17(6), pages 553-569.
  18. Maria Luisa Mancusi & Andrea Vezzulli, 2010. "R&D, Innovation and Liquidity Constraints," KITeS Working Papers 030, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised May 2010.
  19. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
  20. Mariacristina Piva & Marco Vivarelli, 2009. "The role of skills as a major driver of corporate R&D," International Journal of Manpower, Emerald Group Publishing, vol. 30(8), pages 835-852, November.
  21. D’Este, Pablo & Iammarino, Simona & Savona, Maria & von Tunzelmann, Nick, 2012. "What hampers innovation? Revealed barriers versus deterring barriers," Research Policy, Elsevier, vol. 41(2), pages 482-488.
  22. Pablo D'Este & Francesco Rentocchini & Jaider Manuel Vega Jurado, 2010. "Lowering barriers to engage in innovation: evidence from the Spanish innovation survey," Openloc Working Papers 1020, Public policies and local development.
  23. Jaeyong Song & Paul Almeida & Geraldine Wu, 2003. "Learning--by--Hiring: When Is Mobility More Likely to Facilitate Interfirm Knowledge Transfer?," Management Science, INFORMS, vol. 49(4), pages 351-365, April.
  24. Dominique Tourigny & Can Le, 2004. "Impediments to innovation faced by Canadian manufacturing firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(3), pages 217-250.
  25. Alessandra Canepa & Paul Stoneman, 2008. "Financial constraints to innovation in the UK: evidence from CIS2 and CIS3," Oxford Economic Papers, Oxford University Press, vol. 60(4), pages 711-730, October.
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