Financial constraints and the cyclical pattern of digitalization in manufacturing firms

Dolores Añon Higón, Juan A. Máñez, Amparo Sanchis and Juan A. Sanchis
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Dolores Añon Higón: Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)
Juan A. Máñez: Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)
Amparo Sanchis: Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)
Juan A. Sanchis: Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)

No 2502, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: We examine how financial constraints influence the digitalization of Spanish manufacturing firms, taking into account the business cycle. Our study covers a representative sample of Spanish manufacturing firms from 2001 to 2017. We offer empirical insights into the moderating role of the business cycle on the impact of financial constraints on firms’ digitalization efforts, distinguishing between large firms and small and medium-sized enterprises (SMEs). We build a firm-year financial score aimed to mirror the extent of financial constraints, and a synthetic index of digitalization, both at the firm level. We estimate a panel data specification for firms’ digitalization intensity using a fractional response method. Our findings highlight that financial constraints pose a hurdle to digitalization, particularly for SMEs, and show that firms’ digitalization exhibits a counter-cyclical pattern, both for SMEs and large firms.

Keywords: Digitalization; manufacturing firms; financial constraints; business cycle (search for similar items in EconPapers)
JEL-codes: L23 L60 M20 O33 (search for similar items in EconPapers)
Date: 2025-01
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-sbm
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