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Title:Innovative capability and financing constraints for innovation: More money, more innovation? PDF Logo
Authors:Hottenrott, Hanna
Peters, Bettina
Issue Date:2009
Series/Report no.:ZEW Discussion Papers 09-081
Abstract:This study presents a novel empirical approach to identify financing constraints for innovation based on the idea of an ideal test as suggested by Hall (2008). Firms were offered a hypothetical payment and were asked to choose between alternatives of use. If they choose additional innovation projects they must have had some unexploited investment opportunities that were not profitable using more costly external finance. That is, these firms have been financially constrained. We attribute constraints for innovation not only to lacking financing, but also to firms' innovative capability. Econometric results show that financial constraints do not depend on the availability of internal funds perse, but that they are driven by innovative capability. We find firms with high innovative capability but low financial resources to be most likely subject to financing constraints. Yet, we also observe constraints for financially sound firms that may have to put ideas on the shelf.
Subjects:Innovation
financing constraints
innovative capability
multivariate probit models
JEL:O31
O32
C35
more recent Version:http://hdl.handle.net/10419/45853
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des ZEW
ZEW Discussion Papers

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