Financial constraints and the failure of innovation projects

Jose Garcia-Quevedo, Agustí Segarra-Blasco and Mercedes Teruel

Technological Forecasting and Social Change, 2018, vol. 127, issue C, 127-140

Abstract: Although many innovation projects are abandoned before completion, the empirical evidence has focused on the determinants of innovation, while failed projects have received little attention. This paper analyses the role of financial obstacles on the likelihood of abandoning an innovation project by potentially innovative Spanish firms for the period 2005–2013. Our analysis differentiates between the impacts of internal and external barriers on the probability of abandoning a project, and we examine whether these differ depending on the stage of the innovation process. Controlling for potential endogeneity, we use a bivariate probit model to take into account the simultaneity of financial constraints and the decision to abandon an innovation project. Our results show that it is during the conception stage that financial constraints have their greatest effect on the probability of abandoning an innovation project. In addition, the financial sources are not neutral across the innovation project lifecycle. During the design phase, Spanish firms are more sensitive to internal financial sources while, during the execution stage, they are more sensitive to external sources.

Keywords: Barriers to innovation; Failure of innovation projects; Financial constraints (search for similar items in EconPapers)
JEL-codes: D21 O31 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (70)

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Working Paper: Financial constraints and the failure of innovation projects (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:127:y:2018:i:c:p:127-140

DOI: 10.1016/j.techfore.2017.05.029

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