Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/29441 
Year of Publication: 
1996
Series/Report no.: 
ZEW Discussion Papers No. 96-28
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Abstract: 
Using a newly constructed panel dataset of German enterprises, I estimate R&D and capital investment equations for the time period from 1990 to 1994. Simple accelerator specifications indicate considerable sensitivity of R&D and investment to cash flow for relatively small firms. Much of this effect vanishes already once error-correcting behavior is taken into account, but a significant positive relationship between cash flow and investment remains for relatively small firms. In the case of R&D, weak but significant cash flow persist both for small and large firms. The evidence from Euler equation estimates is not conclusive. The investment Euler equation for large firms appears to perform relatively well and yields results close to those expected under the null hypothesis of no financing constraints. The estimates from the Euler equation for R&D are not informative. Additional evidence from survey data suggests that the cash flow sensitivity of investment in small firms is likely to reflect financing constraints.
Subjects: 
R&D
investment
financial constraints
firm size
credit rationing
JEL: 
L10
O31
C23
G30
Document Type: 
Working Paper
Document Version: 
Digitized Version

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