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R&D investment, Credit Rationing and Sample Selection

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Abstract

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.

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  • Gianfranco Atzeni & Claudio Piga, 2005. "R&D investment, Credit Rationing and Sample Selection," Discussion Paper Series 2005_6, Department of Economics, Loughborough University, revised Jun 2005.
  • Handle: RePEc:lbo:lbowps:2005_6
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    More about this item

    Keywords

    Bivariate Probit; Innovation; selectivity; in-house R&D.;
    All these keywords.

    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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