IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

R&D investment, Credit Rationing and Sample Selection

We study whether R&D-intensive firms are liquidity-constrained, by also modeling their antecedent decision to apply for credit. This sample selection issue is relevant when studying a borrower-lender relationship, as the same factors can influence the decisions of both parties. We find firms with no or low R&D intensity to be less likely to request extra funds. When they do, we observe a higher probability of being denied credit. Such a relationship is not supported by evidence from the R&D-intensive firms. Thus, our findings lend support to the notion of credit constraints being severe only for a sub-sample of innovative firms. Furthermore, the results suggest that the way in which the R&D activity is organized may differentially affect a firms’ probability of being credit-constrained.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Huw Edwards)

Download Restriction: no

Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2005_6.

in new window

Date of creation: Jun 2005
Date of revision: Jun 2005
Handle: RePEc:lbo:lbowps:2005_6
Contact details of provider: Postal: Loughborough, Leicestershire, LE11 3TU
Phone: +44 (0) 1509 222701
Fax: +44 (0) 1509 223910
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  2. Mocnik, Dijana, 2001. "Asset specificity and a firm's borrowing ability: an empirical analysis of manufacturing firms," Journal of Economic Behavior & Organization, Elsevier, vol. 45(1), pages 69-81, May.
  3. C. Piga & M. Vivarelli, 2003. "Sample selection in estimating the determinants of cooperative R&D," Applied Economics Letters, Taylor & Francis Journals, vol. 10(4), pages 243-246.
  4. Gianni deFraja & Claudio Piga, 2000. "Strategic Debt in Vertical Relationships," Econometric Society World Congress 2000 Contributed Papers 0059, Econometric Society.
  5. Hall, Bronwyn H., 2002. "The Financing of Research and Development," Department of Economics, Working Paper Series qt34c1c643, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  6. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
  7. Robin Boadway & Michael Keen, 2004. "Financing New Investments under Asymmetric Information: a General Approach," Cahiers de recherche 0407, CIRPEE.
  8. Bayona, Cristina & Garcia-Marco, Teresa & Huerta, Emilio, 2001. "Firms' motivations for cooperative R&D: an empirical analysis of Spanish firms," Research Policy, Elsevier, vol. 30(8), pages 1289-1307, October.
  9. de Meza, David & Webb, David, 2000. "Does credit rationing imply insufficient lending?," Journal of Public Economics, Elsevier, vol. 78(3), pages 215-234, November.
  10. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-87, May.
  11. Tether, Bruce S., 2002. "Who co-operates for innovation, and why: An empirical analysis," Research Policy, Elsevier, vol. 31(6), pages 947-967, August.
  12. Guiso, Luigi, 1997. "High-Tech Firms and Credit Rationing," CEPR Discussion Papers 1696, C.E.P.R. Discussion Papers.
  13. Jeremy Berkowitz & Michelle J. White, 2004. "Bankruptcy and Small Firms' Access to Credit," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 69-84, Spring.
  14. Fraja, Gianni De & Piga, Claudio A. G., 2004. "Strategic debt in vertical relationships: theory and evidence," Research in Economics, Elsevier, vol. 58(2), pages 103-123, June.
  15. Claudio A . Piga & Marco Vivarelli, 2004. "Internal and External R&D: A Sample Selection Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(4), pages 457-482, 09.
  16. Showalter, Dean, 1999. "Strategic debt: evidence in manufacturing," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 319-333, April.
  17. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  18. Asher Blass & Oved Yosha, 2003. "Financing R&D in mature companies: An empirical analysis," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(5), pages 425-447.
  19. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  20. Jensen, Richard & Showalter, Dean, 2004. "Strategic debt and patent races," International Journal of Industrial Organization, Elsevier, vol. 22(7), pages 887-915, September.
  21. Spiros Bougheas & Holger Görg & Eric Strobl, 2003. "Is R & D Financially Constrained? Theory and Evidence from Irish Manufacturing," Review of Industrial Organization, Springer, vol. 22(2), pages 159-174, March.
  22. repec:bla:restud:v:50:y:1983:i:2:p:331-46 is not listed on IDEAS
  23. Hellmann, Thomas & Stiglitz, Joseph, 2000. "Credit and equity rationing in markets with adverse selection," European Economic Review, Elsevier, vol. 44(2), pages 281-304, February.
  24. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  25. Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-55, September.
  26. Bagella, M. & Becchetti, L. & Caggese, A., 2001. "Financial constraints on investments: A three-pillar approach," Research in Economics, Elsevier, vol. 55(2), pages 219-254, June.
  27. Veugelers, Reinhilde & Cassiman, Bruno, 1999. "Make and buy in innovation strategies: evidence from Belgian manufacturing firms," Research Policy, Elsevier, vol. 28(1), pages 63-80, January.
  28. Greene, William, 1998. "Sample selection in credit-scoring models1," Japan and the World Economy, Elsevier, vol. 10(3), pages 299-316, July.
  29. Robert E. Carpenter & Bruce C. Petersen, 2002. "Capital Market Imperfections, High-Tech Investment, and New Equity Financing," Economic Journal, Royal Economic Society, vol. 112(477), pages F54-F72, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:lbo:lbowps:2005_6. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Huw Edwards)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.