 Investment, R&D and Financial Constraints in Britain and GermanyStephen Bond, Dietmar Harhoff () and John van Reenen Annals of Economics and Statistics, 2005, issue 79-80, 433-460 Abstract: This paper tests for the importance of cash flow on investment in fixed capital and R&D using firm-level panel data in two countries between 1985 and 1994. For German firms, cash flow is not informative in simple econometric models of fixed investment or R&D. In identical specifications for British firms, cash flow is informative about investment, although not about the level of R&D spending conditional on the R&D participation decision. In the UK, we also find that investment is less sensitive to cash flow for R&D-performing firms, and that cash flow predicts whether firms perform R&D or not. We confirm that these differences do not simply reflect a greater role for current cash flow in forecasting future sales. These results suggest that financial constraints are more significant in Britain, that they affect the decision to engage in R&D rather than the level of R&D spending by participants, and that consequently the British firms that do engage in R&D are a self-selected group where financing constraints tend to be less binding. Date: 2005 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2005:i:79-80:p:433-460 Access Statistics for this article Annals of Economics and Statistics is currently edited by Laurent Linnemer More articles in Annals of Economics and Statistics from GENES Contact information at EDIRC. |
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