R&D and Firm Performance in a Transition Economy

Dirk Czarnitzki and Kornelius Kraft

No 06-033, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We estimate the effects of R&D on firms' credit ratings and on financial distress. The main purpose is the comparison of firms in Western Germany and Eastern Germany as a transitional economy. Innovative activity has a positive impact on firm value proxied by ratings in Western Germany, but a negative impact in Eastern Germany. We also consider future financial distress, and find that R&D in Eastern German firms leads to higher default risk, in contrast to Western Germany. There, R&D enhances future performance. This result is highly politically relevant, since the high level of subsidies present in Eastern Germany may be subject to misallocation.

Keywords: Transitional Economy; Credit Rating; Bankruptcy; Innovation; Policy (search for similar items in EconPapers)
JEL-codes: L33 O12 O31 O38 P27 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-ino, nep-ipr, nep-pr~, nep-tid and nep-tra
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Citations: View citations in EconPapers (12)

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Journal Article: R&D and Firm Performance in a Transition Economy (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:4617

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