Financing constraints for innovation

Hanna Hottenrott

Chapter 18 in Elgar Encyclopedia on the Economics of Knowledge and Innovation, 2022, pp 153-156 from Edward Elgar Publishing

Abstract: Investment in innovation is characterized by uncertain and often intangible outcomes, knowledge spillovers as well as information asymmetries between managers vis-Ã -vis lenders and investors. These properties affect the financing of innovation. Financing constraints occur when firms' innovation activities are affected negatively by the lack of internal financing and constrained access to external financing, including high cost of debt or a shortage of equity. The extent to which a firm's innovation activities are affected by financing constraints depends on its size, maturity and the nature of its innovation investments: Smaller and younger firms as well as firms pursuing more radical innovation projects are more likely to face financing constraints than larger, older or incrementally innovating firms.

Keywords: Business and Management; Economics and Finance; Innovations and Technology (search for similar items in EconPapers)
Date: 2022
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