Are R&D companies credit-constrained? Credit frictions during and post-crisis

Kadri Männasoo and Heili Hein

No 29, TUT Economic Research Series from Department of Finance and Economics, Tallinn University of Technology

Abstract: Private research and development (R&D) and innovation activity is believed to fall below the socially optimal level. The credit constraints that R&D companies face due to asymmetric information and credit market imperfections may hinder innovation. This descriptive analysis aims to provide a comparative insight into the credit demand and supply patterns of R&D and non-R&D companies in Central and Eastern European countries during and after the Global Financial Crisis. The study uses company-level data from rounds IV and V of the Business Environment and Enterprise Performance Survey, covering the years 2007-2009 and 2012-2014. It reveals that the dependence of R&D companies on bank credit dropped significantly over the two survey rounds, mirroring substantial self-selection into R&D, with a smaller number of able and well-capitalised companies continuing R&D activity after the crisis. We do not subsequently find convincing evidence that R&D firms that remained in business after the crisis are notably credit-constrained.

Date: 2017-08-31
New Economics Papers: this item is included in nep-cse, nep-ino, nep-sbm and nep-tid
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Citations: View citations in EconPapers (16)

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