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Financial constraints and the failure of innovation projects

Agustí Segarra (), Jose Garcia-Quevedo () and Mercedes Teruel Carrizosa ()
Additional contact information
Agustí Segarra: Research Group of Industry and Territory, Department of Economics and CREIP, Universitat Rovira i Virgili, Av. Universitat, 1; 43204 – Reus (Spain)

No XREAP2013-01, Working Papers from Xarxa de Referència en Economia Aplicada (XREAP)

Abstract: Theoretical and empirical approaches have stressed the existence of financial constraints in innovative activities of firms. This paper analyses the role of financial obstacles on the likelihood of abandoning an innovation project. Although a large number of innovation projects are abandoned before their completion, the empirical evidence has focused on the determinants of innovation while failed projects have received little attention. Our analysis differentiates between internal and external barriers on the probability of abandoning a project and we examine whether the effects are different depending on the stage of the innovation process. In the empirical analysis carried out for a panel data of potential innovative Spanish firms for the period 2004-2010, we use a bivariate probit model to take into account the simultaneity of financial constraints and the decision to abandon an innovation project. Our results show that financial constraints most affect the probability of abandoning an innovation project during the concept stage and that low-technological manufacturing and non-KIS service sectors are more sensitive to financial constraints.

Keywords: barriers to innovation; failure of innovation projects; financial constraints (search for similar items in EconPapers)
JEL-codes: D21 O31 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2013-03, Revised 2013-03
New Economics Papers: this item is included in nep-ent, nep-ino, nep-knm, nep-ppm and nep-sbm
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http://www.xreap.cat/RePEc/xrp/pdf/XREAP2013-01.pdf First version, 2013 (application/pdf)
http://www.xreap.cat/RePEc/xrp/pdf/XREAP2013-01.pdf Revised version, 2013 (application/pdf)

Related works:
Journal Article: Financial constraints and the failure of innovation projects (2018) Downloads
Working Paper: Financial constraints and the failure of innovation projects (2013) Downloads
Working Paper: Financial constraints and the failure of innovation projects (2013) Downloads
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