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Financial constraints and the failure of innovation projects

José García-Quevedo (), Agustí Segarra-Blasco () and Mercedes Teruel ()
Additional contact information
José García-Quevedo: IEB, Universitat de Barcelona
Agustí Segarra-Blasco: GRIT, Universitat Rovira i Virgili

No XREAP2016-02, Working Papers from Xarxa de Referència en Economia Aplicada (XREAP)

Abstract: Theoretical and empirical approaches have stressed the existence of financial constraints in firms’ innovative activities. 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. This paper analyses the role of financial obstacles on the likelihood of abandoning an innovation project by using panel data of potential innovative Spanish firms for the period 2005–2013. 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. Controlling for potential endogeneity, 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.

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: 42 pages
Date: 2016-09, Revised 2016-09
New Economics Papers: this item is included in nep-cfn, nep-com, nep-ent, nep-eur, nep-ino, nep-ppm, nep-sbm and nep-tid
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http://www.xreap.cat/RePEc/xrp/pdf/XREAP2016-02.pdf First version, 2016 (application/pdf)
http://www.xreap.cat/RePEc/xrp/pdf/XREAP2016-02.pdf Revised version, 2016 (application/pdf)

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