Financing Constraints, Radical versus Incremental Innovation, and Aggregate Productivity

Andrea Caggese

No 865, Working Papers from Barcelona School of Economics

Abstract: I provide new empirical evidence on a negative relation between financial frictions and productivity growth over firms' life cycle. I show that a model of firm dynamics with incremental innovation cannot explain such evidence. However also including radical innovation, which is very risky but potentially very productive, allows for joint replication of several stylized facts about the dynamics of young and old firms and of the differences in productivity growth in industries with different degrees of financing frictions. These frictions matter because they act as a barrier to entry that reduces competition and the risk taking of young firms.

JEL-codes: D22 D24 D25 G32 L25 L60 O31 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-bec, nep-cse, nep-dge, nep-eff, nep-ent, nep-ino and nep-sbm
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Citations: View citations in EconPapers (6)

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Journal Article: Financing Constraints, Radical versus Incremental Innovation, and Aggregate Productivity (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:865

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