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Financial Constraint and R&D Investment: Evidence from CIS

  • 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)

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.

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Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 011.

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Date of creation: 2007
Date of revision:
Handle: RePEc:unm:unumer:2007011
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  1. De Bondt, Raymond & Slaets, Patrick & Cassiman, Bruno, 1992. "The degree of spillovers and the number of rivals for maximum effective R &D," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 35-54, March.
  2. Charles P. Himmelberg & Bruce C. Petersen, 1991. "R&D and internal finance: a panel study of small firms in high-tech industries," Working Paper Series, Macroeconomic Issues 91-25, Federal Reserve Bank of Chicago.
  3. Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 647-63, October.
  4. Oivind Anti Nilsen & Fabio Schiantarelli, 1996. "Zeroes and Lumps in Investment: Empirical Evidence on Irreversibilities and Non-Convexities," Boston College Working Papers in Economics 337., Boston College Department of Economics, revised 01 Nov 2000.
  5. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-96, September.
  6. Arthur Lewbel & Susanne M. Schennach, 2003. "A Simple Ordered Data Estimator For Inverse Density Weighted Functions," Boston College Working Papers in Economics 557, Boston College Department of Economics, revised 01 May 2005.
  7. Stephen Bond & Costas Meghir, 1990. "Dynamic Investment Models and the Firm's Financial Policy," CEPR Financial Markets Paper 0013, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
  8. Gomes, Joao F & Yaron, Amir & Zhang, Lu, 2002. "Asset Pricing Implications of Firms' Financing Constraints," CEPR Discussion Papers 3495, C.E.P.R. Discussion Papers.
  9. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  10. Lars-Hendrik Röller & Mikhel M. Tombak & Ralph Siebert, 1997. "Why Firms Form Research Joint Ventures: Theory and Evidence," CIG Working Papers FS IV 97-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Oct 1997.
  11. Frédérique Savignac, 2006. "The impact of financial constraints on innovation : evidence from French manufacturing firms," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00115717, HAL.
  12. Sean Cleary, 1999. "The Relationship between Firm Investment and Financial Status," Journal of Finance, American Finance Association, vol. 54(2), pages 673-692, 04.
  13. 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.
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