Financial Constraints and Innovation: Why Poor Countries Don't Catch Up

Yuriy Gorodnichenko and Monika Schnitzer ()

No 4786, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper examines micro-level channels of how financial development can affect macroeconomic outcomes like the level of income and export intensity. We investigate theoretically and empirically how financial constraints affect a firm's innovation and export activities, using unique firm survey data which provides direct measures for innovations and firm-specific financial constraints. We find that financial constraints restrain the ability of domestically owned firms to innovate and export and hence to catch up to the technological frontiers. This negative effect is amplified as financial constraints force export and innovation activities to become substitutes although they are generally natural complements.

Keywords: innovation; productivity; financial constraint; export; technology frontier; BEEPS (search for similar items in EconPapers)
JEL-codes: F1 G3 O16 O3 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2010-02
New Economics Papers: this item is included in nep-dev, nep-eff, nep-ino, nep-knm and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (74)

Published - published in: Journal of the European Economic Association, 2013, 11(5), 1115-1152

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https://docs.iza.org/dp4786.pdf (application/pdf)

Related works:
Journal Article: FINANCIAL CONSTRAINTS AND INNOVATION: WHY POOR COUNTRIES DON'T CATCH UP (2013)
Working Paper: Financial constraints and innovation: Why poor countries don't catch up (2013)
Working Paper: Financial constraints and innovation: Why poor countries don't catch up (2010)
Working Paper: Financial constraints and innovation: Why poor countries don't catch up (2010)
Working Paper: Financial constraints and innovation: Why poor countries don't catchup (2010)
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