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Financial Constraint and R&D Investment: Evidence from CIS

Pierre Mohnen (), Amaresh Tiwari (), Franz Palm and Sybrand Schim van der Loeff ()
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Amaresh Tiwari: University of Maastricht
Sybrand Schim van der Loeff: University of Maastricht

No 11, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: Using direct information on financial constraints from questionnaires, rather than the commonly used balance sheet information, this paper presents evidence that, controlling for traditional factors as size, market share, cooperative arrangement, and expected profitability, financial constraints affect a firm's decision of how much to invest in R&D activities. Apart from these constraints, other hampering factors as market uncertainty and institutional bottlenecks, regulations and organizational rigidities also affect R&D investment. A semiparametric estimator of sample selection is employed to control for potential endogeneity of the regressors. The paper also shows that old firms and firms that belong to a group are less financially constrained when it comes to undertaking R&D activities. For the estimation a semiparametric binary choice model is used.

Keywords: Research and Development; Investment; Financial Risk (search for similar items in EconPapers)
JEL-codes: O32 G11 G32 (search for similar items in EconPapers)
Date: 2007
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