Do Financing Constraints Matter for the Direction of Technical Change in Energy R&D?

Joëlle Noailly and Roger Smeets

No 58-2018, CIES Research Paper series from Centre for International Environmental Studies, The Graduate Institute

Abstract: The objective of this study is to examine the impact of firms’ financing constraints on innovation activities in renewable (REN) versus fossil-fuel (FF) technologies. Our empirical methodology relies on the construction of a firm-level dataset for 1,300 European firms over the 1995-2009 period combining balance-sheet information linked with patenting activities in REN and FF technologies. We estimate the importance of the different types of financing (e.g. cash flow, long-term debt, and stock issues) on firms’ patenting activities for the different samples of firms. We use count estimation techniques commonly used for models with patent data and control for a large set of firm-specific controls and market developments in REN and FF technologies. We find evidence for a positive impact of internal finance on patenting activities for the sample of firms specialized in REN innovation, while we find no evidence of this link for other firms, such as firms conducting FF innovation or large mixed firms conducting both REN and FF innovation. Hence, financing constraints matter for firms specialized in REN innovation but not for other firms. Our results have important implications for policymaking as the results emphasize that small innovative newcomers in the field of renewable energy are particularly vulnerable to financing constraints.

Keywords: R&D; .; Financing constraints; renewable energy (search for similar items in EconPapers)
JEL-codes: O14 O33 Q41 Q42 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2019-01-31
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-cse, nep-eff, nep-ene, nep-eur, nep-ino, nep-ppm, nep-sbm and nep-tid
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Citations: View citations in EconPapers (1)

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