Patents, firm size and financial constraints: an empirical analysis for a panel of Italian manufacturing firms

Giuseppe Scellato

Cambridge Journal of Economics, 2007, vol. 31, issue 1, 55-76

Abstract: The paper empirically investigates the issue of financial constraints to investment, focusing on its relationship with innovation activities. The study is based on the analysis of a cross-industries panel of 804 Italian companies, observed through the years 1995--2000. The main objective of the study is to highlight whether there are financial determinants underlying the strong bias of patenting activity towards larger companies in the Italian economy. By applying a dynamic panel analysis, we found that only the firms showing lower financial constraints are able to keep a sustained patenting profile through time. Our evidence suggests the existence of an imperfect capital market in the Italian economy, particularly in the case of medium-sized companies, which tend to delay inefficiently the start of in-house R&D activities. Copyright 2007, Oxford University Press.

Date: 2007
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