Financing constraints and investments in R&D: Evidence from Indian manufacturing firms
Subash Sasidharan,
P.J. Jijo Lukose and
Surenderrao Komera (surenderraogp@gmail.com)
Authors registered in the RePEc Author Service: Jijo Lukose PJ (jijo.lukose@gmail.com)
The Quarterly Review of Economics and Finance, 2015, vol. 55, issue C, 28-39
Abstract:
This study examines the extent to which financing constraints affect the research and development (R&D) expenditure of Indian manufacturing firms during the period 1991–2011. Using dynamic R&D investment model, we find significant positive relationship between a firm's R&D expenditure and internal cash flow. We lend support to the financing constraint hypothesis by showing higher cash flow sensitivity for small and young firms. Further, we explore the effect of business group affiliation and financial market liquidity on the relationship between financial factors and investments in R&D. We fail to find any significant advantage for group-affiliated firms, indicating ineffectiveness of business groups in alleviating financial constraints. Further, we observe that sample firms do not use external equity to finance their R&D even during periods of hot-equity market and are not engaging in R&D smoothing using cash reserves.
Keywords: Financing constraints; Manufacturing; R&D; Cash flow (search for similar items in EconPapers)
JEL-codes: G31 G32 O32 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (47)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976914000593
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:55:y:2015:i:c:p:28-39
DOI: 10.1016/j.qref.2014.07.002
Access Statistics for this article
The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty
More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).