Innovative Capability and Financing Constraints for Innovation: More Money, More Innovation?

By Hanna Hottenrott, Bettina Peters. Review of Economics and Statistics, 2012

422 citations recorded by the source corpus.

Abstract This study presents a novel empirical approach to identify financing constraints for innovation based on the concept of an ideal test (Hall, 2008). Firms were offered a hypothetical payment and asked to choose between alternatives of use. If they selected additional innovation projects, they must have had some unexploited investment opportunities that were not profitable using more costly external finance. 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 per se but that they are driven by innovative capability.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/7bf4bde6316a812566327f641b5bff675f27284c

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Citations in the corpus

Financing constraints and investments in R&D: Evidence from Indian manufacturing firms (2015, neutral): “(Czarnitzki, 2006; Bond et al., 2006; Savignac, 2008; Brown et al 2009; Czarnitzki and Hottenrott, 2011; Hottenrott and Peters, 2012).”
Financial Constraints and the Failure of Innovation Projects (2018, positive): “In line with previous literature (Hottenrott and Peters, 2012), there may be an interaction between a firm’s innovative capability and the sensitiveness to perceiving financial barriers.”
Financial barriers and environmental innovations: evidence from EU manufacturing firms (2017, background): “These studies highlight that the high degree of uncertainty that characterises innovation projects, together with their complexity and specificity, makes firms less prone to investing in innovation in the presence of a lack of financial availability (Hottenrott and Peters, 2012).”
Caught in the Middle? The Economics of Middle-Income Traps (2017, neutral): “14See Ayyagari et al. (2011), Brown et al. (2012), and Hottenrott and Peters (2012).”
No money, no honey? Financial versus knowledge and demand constraints on innovation (2017, background): “…including innovation-related expenditure (inputs) and the introduction of innovation outputs, focus on (external) financing constraints on the firm’s cash flow, which deter R&D investment (for a review, see Schiantarelli, 1996; Hall, 2002; Bond et al., 1999; Hottenrott and Peters, 2011).”
Financial inclusion and green economic efficiency: evidence from China (2021, positive): “…productivity, competitiveness, and sustainable economic growth (Aghion et al. 2012), while credit constraints can affect investments in firms’ innovation projects as such projects are typically characterized by a high degree of uncertainty, complexity and specificity (Hottenrott and Peters 2012).”
Financing constraints, R&D investments and innovative performances: new empirical evidence at the firm level for Europe (2016, neutral): “On the other hand, the “more money, more innovation” story (Hottenrott and Peters, 2012) has also been questioned, by pointing to a possible beneficial impact of financing constraints on the selection of more efficient innovative projects (Musso and Schiavo, 2008; Almeida et al.”
Institutional determinants of R&D investment: Evidence from emerging markets (2019, background): “A widely accepted view among the researchers and practitioners is that innovation is an important constituent of productivity, competitiveness and sustainable economic growth (Hottenrott and Peters, 2012).”