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RESEARCH AND DEVELOPMENT IN SMALL AND MEDIUM‐SIZED ENTERPRISES: THE ROLE OF FINANCIAL CONSTRAINTS AND PUBLIC FUNDING

Dirk Czarnitzki

Scottish Journal of Political Economy, 2006, vol. 53, issue 3, 335-357

Abstract: This paper presents microeconometric evidence on financing constraints for research and development activities in German small‐ and medium‐sized firms (SME). Special attention is paid to the role of public research and development (R&D) subsidies. For this purpose SMEs in West and East Germany are compared because these regions are very different in their supply of public R&D funding. The empirical evidence suggests that West German SMEs are financially constrained in their R&D activities by both internal and external resources. In East Germany, firms are not sensitive to external constraints, possibly due to high public R&D subsidies. The results show that R&D in East Germany is to a large extent driven by public subsidies and that the usual financial market mechanisms are dysfunctional with respect to R&D in this region.

Date: 2006
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https://doi.org/10.1111/j.1467-9485.2006.00383.x

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Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

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