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Financial Constraint and R&D Investment: Evidence from CIS

Author

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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 011, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2007011
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    File URL: https://www.merit.unu.edu/publications/wppdf/2007/wp2007-011.pdf
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    References listed on IDEAS

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    11. Øivind Anti Nilsen & Fabio Schiantarelli, 2003. "Zeros and Lumps in Investment: Empirical Evidence on Irreversibilities and Nonconvexities," The Review of Economics and Statistics, MIT Press, pages 1021-1037.
    12. 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 569-596, September.
    13. 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, pages 35-54.
    14. 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.
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    Citations

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    Cited by:

    1. Pellegrino, Gabriele & Savona, Maria, 2013. "Is money all? Financing versus knowledge and demand constraints to innovation," MERIT Working Papers 029, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Thomas H.W. Ziesemer, 2014. "Country terms of trade: trends, unit roots, over-differencing, endogeneity, time dummies, and heterogeneity," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(6), pages 767-796, September.
    3. 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, pages 701-736.
    4. Hall, B.H. & Sena, Vania, 2014. "Appropriability mechanisms, innovation and productivity: Evidence from the UK," MERIT Working Papers 059, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Mairesse, Jacques & Mohnen, Pierre, 2010. "Using Innovation Surveys for Econometric Analysis," Handbook of the Economics of Innovation, Elsevier.
    6. Christian Schröder, 2009. "Financial System and Innovations: Determinants of Early Stage Venture Capital in Europe," EIIW Discussion paper disbei167, Universitätsbibliothek Wuppertal, University Library.
    7. D’Este, Pablo & Iammarino, Simona & Savona, Maria & von Tunzelmann, Nick, 2012. "What hampers innovation? Revealed barriers versus deterring barriers," Research Policy, Elsevier, pages 482-488.
    8. 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.
    9. Hall, Bronwyn H. & Sena, Vania, 2015. "Appropriability Mechanisms, Innovation and Productivity:Evidence from the UK," Working Paper Series in Economics and Institutions of Innovation 411, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    10. P. Mohnen & F. Palm & S. Loeff & A. Tiwari, 2008. "Financial Constraints and Other Obstacles: are they a Threat to Innovation Activity?," De Economist, Springer, pages 201-214.
    11. 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.
    12. P. Mohnen & F. Palm & S. Loeff & A. Tiwari, 2008. "Financial Constraints and Other Obstacles: are they a Threat to Innovation Activity?," De Economist, Springer, pages 201-214.
    13. Christian Rammer & Dirk Czarnitzki & Alfred Spielkamp, 2009. "Innovation success of non-R&D-performers: substituting technology by management in SMEs," Small Business Economics, Springer, pages 35-58.
    14. 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.
    15. Spielkamp, Alfred & Czarnitzki, Dirk & Rammer, Christian, 2008. "Innovation Success of Non-R&D-Performers: Substituting Technology by Management in SMEs," ZEW Discussion Papers 08-092, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    16. Giebel, Marek & Kraft, Kornelius, 2015. "The impact of the financial crisis on investments in innovative firms," ZEW Discussion Papers 15-069, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    17. repec:taf:ecinnt:v:26:y:2017:i:1-2:p:42-62 is not listed on IDEAS
    18. Christian Schröder, 2009. "Financial System and Innovations-Determinants of Early Stage Venture Capital in Europe," Schumpeter Discussion Papers sdp09004, Universitätsbibliothek Wuppertal, University Library.
    19. 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, pages 701-736.
    20. 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, pages 280-292.
    21. Bronwyn H. Hall & Vania Sena, 2017. "Appropriability mechanisms, innovation, and productivity: evidence from the UK," Economics of Innovation and New Technology, Taylor & Francis Journals, pages 42-62.

    More about this item

    Keywords

    Research and Development; Investment; Financial Risk;

    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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