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Financial Constraint and R&D Investment: Evidence from CIS

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  • Mohnen, Pierre

    (UNU-MERIT and University of Maastricht)

  • Tiwari, Amaresh

    (University of Maastricht)

  • Palm, Franz

    (University of Maastricht)

  • Schim van der Loeff, Sybrand

    (University of Maastricht)

Abstract

Using direct information on financial constraints from questionnaires, rather than the commonly used balance sheet information, this paper presents evidence that, controlling for traditional factors as size, market share, cooperative arrangement, and expected profitability, financial constraints affect a firm's decision of how much to invest in R&D activities. Apart from these constraints, other hampering factors as market uncertainty and institutional bottlenecks, regulations and organizational rigidities also affect R&D investment. A semiparametric estimator of sample selection is employed to control for potential endogeneity of the regressors. The paper also shows that old firms and firms that belong to a group are less financially constrained when it comes to undertaking R&D activities. For the estimation a semiparametric binary choice model is used.

Suggested Citation

  • Mohnen, Pierre & Tiwari, Amaresh & Palm, Franz & Schim van der Loeff, Sybrand, 2007. "Financial Constraint and R&D Investment: Evidence from CIS," MERIT Working Papers 2007-011, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2007011
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    References listed on IDEAS

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    Cited by:

    1. Filipe Silva & Carlos Carreira, 2012. "Do financial constraints threat the innovation process? Evidence from Portuguese firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(8), pages 701-736, November.
    2. Bronwyn H. Hall & Vania Sena, 2017. "Appropriability mechanisms, innovation, and productivity: evidence from the UK," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 26(1-2), pages 42-62, February.
    3. Mairesse, Jacques & Mohnen, Pierre, 2010. "Using Innovation Surveys for Econometric Analysis," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1129-1155, Elsevier.
    4. Christian Schröder, 2009. "Financial System and Innovations-Determinants of Early Stage Venture Capital in Europe," Schumpeter Discussion Papers sdp09004, Universitätsbibliothek Wuppertal, University Library.
    5. Rammer, Christian & Köhler, Christian & Murmann, Martin & Pesau, Agnes & Schwiebacher, Franz & Kinkel, Steffen & Kirner, Eva & Schubert, Torben & Som, Oliver, 2010. "Innovationen ohne Forschung und Entwicklung: Eine Untersuchung zu Unternehmen, die ohne eigene FuE-Tätigkeit neue Produkte und Prozesse einführen," Studien zum deutschen Innovationssystem 15-2011, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin.
    6. P. Mohnen & F. Palm & S. Loeff & A. Tiwari, 2008. "Financial Constraints and Other Obstacles: are they a Threat to Innovation Activity?," De Economist, Springer, vol. 156(2), pages 201-214, June.
    7. Guariglia, Alessandra & Liu, Pei, 2014. "To what extent do financing constraints affect Chinese firms' innovation activities?," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 223-240.
    8. Pellegrino, Gabriele & Savona, Maria, 2013. "Is money all? Financing versus knowledge and demand constraints to innovation," MERIT Working Papers 2013-029, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Elena DRUICA & Roxana ADAM, 2015. "Logistic Regression Models: Reassessing The Determinants Of Product Innovation Using Romanian Survey Data," Journal of Social and Economic Statistics, Bucharest University of Economic Studies, vol. 4(2), pages 1-18, DECEMBER.
    10. D'Este, Pablo & Amara, Nabil & Olmos-Peñuela, Julia, 2016. "Fostering novelty while reducing failure: Balancing the twin challenges of product innovation," Technological Forecasting and Social Change, Elsevier, vol. 113(PB), pages 280-292.
    11. Arif Hartono & Ratih Kusumawardhani, 2019. "Innovation Barriers and Their Impact on Innovation: Evidence from Indonesian Manufacturing Firms," Global Business Review, International Management Institute, vol. 20(5), pages 1196-1213, October.
    12. Pablo D'Este & Francesco Rentocchini & Jaider Vega-Jurado, 2014. "The Role of Human Capital in Lowering the Barriers to Engaging in Innovation: Evidence from the Spanish Innovation Survey," Industry and Innovation, Taylor & Francis Journals, vol. 21(1), pages 1-19, January.
    13. 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.
    14. Pier Francesco Asso & Vito Pipitone, 2013. "Ostacoli e determinanti dell’innovazione: un’analisi sulle imprese siciliane di successo," Rivista di Politica Economica, SIPI Spa, issue 3, pages 157-193, July-Sept.
    15. Christian Rammer & Dirk Czarnitzki & Alfred Spielkamp, 2009. "Innovation success of non-R&D-performers: substituting technology by management in SMEs," Small Business Economics, Springer, vol. 33(1), pages 35-58, June.
    16. Giebel, Marek & Kraft, Kornelius, 2015. "The impact of the financial crisis on investments in innovative firms," ZEW Discussion Papers 15-069, ZEW - Leibniz Centre for European Economic Research.
    17. Luisa Gagliardi & Simona Iammarino, 2018. "Innovation in risky markets: ownership and location advantages in the UK regions," Journal of Economic Geography, Oxford University Press, vol. 18(5), pages 1177-1201.

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    More about this item

    Keywords

    Research and Development; Investment; Financial Risk;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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