The impact of financial constraints on innovation: What can be learned from a direct measure?

Frédérique Savignac

Working papers from Banque de France

Abstract: This paper examines the impact of financial constraints on innovation for established firms. We make use of a direct measure of the existence of financial constraints obtained thanks to a specific survey addressed to French established firms (FIT, Sessi). This is a distinctive feature of this paper as most of previous studies had to rely on proxies (like the cash-flow sensitivity) which may be subject to interpretation problems. The probability to have innovative activities and the probability to face financial constraints are simultaneously estimated by a recursive bivariate probit model. Accounting for the endogeneity of the financial constraint variable, we find that financial constraints significantly reduce the likelihood that firms have innovative activities. The probability to encounter financial constraints is explained by firms' ex ante financing structure and economic performances.

Keywords: Innovation; Financing constraints; Recursive bivariate probit. (search for similar items in EconPapers)
JEL-codes: C35 G31 O31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2007
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: IMPACT OF FINANCIAL CONSTRAINTS ON INNOVATION: WHAT CAN BE LEARNED FROM A DIRECT MEASURE? (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:169

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