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Financial constraints and the failure of innovation projects

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  • Segarra Blasco, Agustí, 1958-
  • García Quevedo, José
  • Teruel, Mercedes

Abstract

Theoretical and empirical approaches have stressed the existence of financial constraints in innovative activities of firms. This paper analyses the role of financial obstacles on the likelihood of abandoning an innovation project. Although a large number of innovation projects are abandoned before their completion, the empirical evidence has focused on the determinants of innovation while failed projects have received little attention. Our analysis differentiates between internal and external barriers on the probability of abandoning a project and we examine whether the effects are different depending on the stage of the innovation process. In the empirical analysis carried out for a panel data of potential innovative Spanish firms for the period 2004-2010, we use a bivariate probit model to take into account the simultaneity of financial constraints and the decision to abandon an innovation project. Our results show that financial constraints most affect the probability of abandoning an innovation project during the concept stage and that low-technological manufacturing and non-KIS service sectors are more sensitive to financial constraints. Keywords: barriers to innovation, failure of innovation projects, financial constraints JEL Classifications: O31, D21

Suggested Citation

  • Segarra Blasco, Agustí, 1958- & García Quevedo, José & Teruel, Mercedes, 2013. "Financial constraints and the failure of innovation projects," Working Papers 2072/211807, Universitat Rovira i Virgili, Department of Economics.
  • Handle: RePEc:urv:wpaper:2072/211807
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    Cited by:

    1. Emanuele Brancati, 2014. "Innovation, financial constraints and relationship lending: firm-level evidence in times of crisis," Working Papers CASMEF 1403, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    2. Brancati, Emanuele, 2013. "Innovation, financial constraints and relationship lending: evidence from Italy during the recent crises," MPRA Paper 50329, University Library of Munich, Germany.
    3. David Audretsch & Agustí Segarra & Mercedes Teruel, 2014. "Why don't all young firms invest in R&D?," Small Business Economics, Springer, vol. 43(4), pages 751-766, December.
    4. Segarra Blasco, Agustí, 1958- & Teruel, Mercedes, 2014. "Young Firms and R&D subsidies in Catalonia," Working Papers 2072/242276, Universitat Rovira i Virgili, Department of Economics.
    5. Sandra M. Leitner & Robert Stehrer, 2016. "The Role of Financial Constraints for Different Innovation Strategies: Evidence for CESEE and FSU Countries," wiiw Working Papers 125, The Vienna Institute for International Economic Studies, wiiw.
    6. repec:eee:respol:v:46:y:2017:i:9:p:1570-1579 is not listed on IDEAS
    7. Michael Landesmann & Sandra M. Leitner & Robert Stehrer, 2016. "Changing Patterns in M&E-Investment-Based Innovation Strategies in CESEE and FSU Countries," wiiw Working Papers 123, The Vienna Institute for International Economic Studies, wiiw.

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    Keywords

    Innovacions tecnològiques; Conducta organitzacional; 33 - Economia;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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