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Financing constraints and R&D investments of large corporations in Europe and the USA

Author

Listed:
  • Michele Cincera

    () (European Commission - JRC)

  • Julien Ravet

    () (Solvay Brussels School of Economics and Management, Université Libre de Bruxelles)

Abstract

This paper explores the existence and importance of financing constraints for R&D investments in large EU and US manufacturing companies over the 2000 – 2007 period. The main results obtained by estimating error-correction equations suggest that the sensitivity of R&D investments to cash flow variations are important for European firms while US ones do not appear to be financially constrained. In terms of policy implications, these results suggest improving the conditions for access to external capital to finance R&D activities in the EU.

Suggested Citation

  • Michele Cincera & Julien Ravet, 2010. "Financing constraints and R&D investments of large corporations in Europe and the USA," JRC Working Papers on Corporate R&D and Innovation 2010-03, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:wpaper:201003
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    File URL: https://iri.jrc.ec.europa.eu/documents/10180/0f6915a4-bd49-441e-875c-925133873fc9
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    Cited by:

    1. Dario Guarascio & Mario Pianta & Matteo Lucchese & Francesco Bogliacino, 2015. "Business cycles, technology and exports," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(2), pages 167-200, August.
    2. Michele Cincera & Julien Ravet & Reinhilde Veugelers, 2016. "The sensitivity of R&D investments to cash flows: comparing young and old EU and US leading innovators," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(3), pages 304-320, April.
    3. Pietro Moncada-Paternò-Castello & Peter Voigt, 2010. "Proceedings of CONCORD 2010: 2nd European Conference on Corporate R&D "An Engine for Growth, a Challenge for European Policy". Academic Forum - Summary Report," JRC Working Papers JRC60863, Joint Research Centre (Seville site).
    4. Dario Guarascio & Mario Pianta & Francesco Bogliacino, 2016. "Export, R&D and new products. a model and a test on European industries," Journal of Evolutionary Economics, Springer, vol. 26(4), pages 869-905, October.
    5. repec:taf:applec:v:49:y:2017:i:55:p:5638-5650 is not listed on IDEAS
    6. Kadri Männasoo & Jaanika Meriküll, 2015. "The impact of firm financing constraints on R&D over the business cycle," Working Papers 348, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    7. Alexander Coad & Nicola Grassano, 2016. "Who’s doing who? Growth of sales, employment, assets, profits and R&D entangled in a curious five-way love triangle," JRC Working Papers on Corporate R&D and Innovation 2016-03, Joint Research Centre (Seville site).
    8. Coad, Alex, 2019. "Persistent heterogeneity of R&D intensities within sectors: Evidence and policy implications," Research Policy, Elsevier, vol. 48(1), pages 37-50.
    9. Francesco Bogliacino & Matteo Lucchese, 2011. "Access to finance for innovation: the role of venture capital and the stock market," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2011(4), pages 165-183.
    10. Bogliacino, Francesco & Cardona, Sebastian Gómez, 2014. "Capabilities and investment in R&D: An analysis on European data," Structural Change and Economic Dynamics, Elsevier, vol. 31(C), pages 101-111.
    11. A. Rashad Abdel-Khalik, 2014. "CEO Risk Preference and Investing in R&D," Abacus, Accounting Foundation, University of Sydney, vol. 50(3), pages 245-278, September.
    12. Montresor, Sandro & Vezzani, Antonio, 2015. "The production function of top R&D investors: Accounting for size and sector heterogeneity with quantile estimations," Research Policy, Elsevier, vol. 44(2), pages 381-393.
    13. Aßmuth, Pascal, 2015. "Credit constrained R&D spending and technological change," Center for Mathematical Economics Working Papers 532, Center for Mathematical Economics, Bielefeld University.
    14. Michele Cincera & Reinhilde Veugelers, 2013. "Exploring Europe's R&D deficit relative to the US: Differences in the rates of return to R&D of young leading R&D firms," iCite Working Papers 2013 - 001, ULB -- Universite Libre de Bruxelles.
    15. Cincera, Michele & Veugelers, Reinhilde, 2014. "Differences in the rates of return to R&D for European and US young leading R&D firms," Research Policy, Elsevier, vol. 43(8), pages 1413-1421.
    16. Francesco Bogliacino & Matteo Lucchesex & Leopoldo Nascia & Mario Pianta, 2015. "The Virtuous Circle of Innovation in Italian Firms," Documentos de Trabajo - Escuela de Economía 012630, Universidad Nacional de Colombia -FCE - CID.
    17. Pietro Moncada-Paternò-Castello, 2016. "Sector dynamics and demographics of top R&D firms in the global economy," JRC Working Papers on Corporate R&D and Innovation 2016-06, Joint Research Centre (Seville site).
    18. Kadri Männasoo & Jaanika Merikull, 2015. "The impact of firm financing constraints on R&D over the business cycle," Bank of Estonia Working Papers wp2015-3, Bank of Estonia, revised 30 Dec 2015.
    19. Michele Cincera & Julien Ravet & Reinhilde Veugelers, 2014. "R&D Financing Constraints of Young and Old Innovation Leaders in the EU and the US," iCite Working Papers 2014-008, ULB -- Universite Libre de Bruxelles.
    20. Sara Amoroso, 2015. "Profits, R&D and labour: Breaking the law of diminishing returns to labour," JRC Working Papers on Corporate R&D and Innovation 2015-10, Joint Research Centre (Seville site).

    More about this item

    Keywords

    Financial constraints; R&D investments; error-correction investment equations; system GMM panel data econometric models;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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