Financial constraints and innovation: Why poor countries don't catch up

Yuriy Gorodnichenko and Monika Schnitzer ()

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: This paper examines micro-level channels through which financial development can affect such macroeconomic outcomes as level of income. Specifically, we investigate theoretically and empirically how financial constraints affect a firm’s innovation activities. Theoretical predictions are tested using unique firm survey data, which provide direct measures for innovations and firm-specific financial constraints, as well as information on shocks to firms’ internal funds that serve as firm-level instruments for financial constraints. We find unambiguous evidence that financial constraints restrain the ability of domestically owned firms to innovate and hence to catch up to the technological frontier.

Date: 2013
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Published in Journal of the European Economic Association 5 11(2013): pp. 1115-1152

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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 (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 catch up (2010)
Working Paper: Financial constraints and innovation: Why poor countries don't catchup (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:20443

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