Financial constraints and the failure of innovation projects

Agustí Segarra (agusti.segarra@urv.cat), Jose Garcia-Quevedo and Mercedes Teruel Carrizosa (mercedes.teruel@urv.cat)
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Agustí Segarra: Universitat Rovira i Virgili & CREIP

No 2013/11, Working Papers from Institut d'Economia de Barcelona (IEB)

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 (search for similar items in EconPapers)
JEL-codes: D21 O31 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2013
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Financial constraints and the failure of innovation projects (2018)
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