Verlag:
LUISS Guido Carli, Department of Economics and Business, Arcelli Centre for Monetary and Financial Studies, Rome
Zusammenfassung:
Financial frictions represent a severe obstacle to firms' innovativeness. This paper shows the existence and quantifies the effects of financial barriers to the innovation propensity of Italian SMEs. Employing direct measures of financial constraints and a credit-score estimated ad hoc, I find financially-constrained firms have a probability of innovating that is significantly lower than sound companies (-30%). Results document the existence of a feedback-effect of innovation on firms' financial position, resulting into an additional reduction in firms' propensity to innovate. The paper also highlights the role of soft information in mitigating financial obstacles to innovation by improving the financial condition of more opaque (small) borrowers.