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The determinants of R&D Investment: the role of Cash flow and Capabilities

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Abstract

In this paper we have estimated a behavioural equation for R&D investment. We assess the impact of liquidity constraints and capabilities, measured respectively as internal cash flow and distance from the technological frontier. Our estimation is performed on an industry level panel covering fifteen European countries from 1996 to 2005 and on a sample of European R&D performers extracted from COMPUSTAT covering 2000-2008. Both at industry level and firm level we found that financing constraints exist and that the distance from the frontier negatively affects the decision to engage in R&D. We claim that the implied divergence pattern opens a gap for policy intervention, but that these policies should be correctly tailored and should also promote enablers of technological change.

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  • Francesco Bogliacino & Sebastian Gómez Cardona, 2010. "The determinants of R&D Investment: the role of Cash flow and Capabilities," JRC Working Papers on Corporate R&D and Innovation 2010-10, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:wpaper:201010
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    Cited by:

    1. 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.
    2. Elvin Afandi & Majid Kermani, 2014. "What determines firms’ innovation in Eastern Europe and Central Asia," Perspectives of Innovation in Economics and Business (PIEB), Prague Development Center, vol. 14(1), pages 1-20, February.
    3. Dragos Ilie, 2015. "Credits and Bank Guarantee Letters in Entrepreneurship Development During Crisis," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 17(38), pages 212-212, February.

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    More about this item

    Keywords

    R&D; liquidity constraints; technological frontier; panel data;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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