Financial Constraints: Routine Versus Cutting Edge R&D Investment

By Hanna Hottenrott, Dirk Czarnitzki. 2011

122 citations recorded by the source corpus.

We analyze financial constraints for R&D, where we account for heterogeneity among investments which has been neglected in previous literature. According to economic theory, investments should be distinguished by their degree of uncertainty, e.g. routine R&D versus cutting-edge R&D. Financial constraints should be more binding for cutting-edge R&D than for routine R&D. Using panel data we find that R&D spending of firms devoting a significant fraction of R&D to cutting-edge projects is curtailed by credit constraints while routine R&D investments are not. This has important policy implications with respect to the distribution of R&D subsidies in the economy.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/b2b38cf4b1e682ec04f950d837be3c75131699b6

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Citations in the corpus

What promotes R&D? Comparative evidence from around the world (2017, background): “One reason is simply that “cutting-edge” science is particularly difficult for investors to evaluate, leading to potentially severe asymmetric information problems in high-tech firms (e.g., Brown, Fazzari, and Petersen, 2009; O’Mahony and Vecchi, 2009; Czarnitzki and Hottenrott, 2011).”
(International) R&D Collaboration and SMEs: The effectiveness of targeted public R&D support schemes (2014, background): “These are likely to generate high social benefits, but would possibly not be undertaken without public support due to the high risk of failure and financing constraints associated with more radical R&D (Czarnitzki and Hottenrott, 2011a).”
Subsidies, financial constraints and firm innovative activities in emerging economies (2017, result): “This is slightly higher than the averages reported by Czarnitzki and Hottenrott (2011) for their sample of German firms (27% and 30% for firms undertaking routine R&D and cutting-edge R&D, respectively).”
R&D Partnerships and Innovation Performance: Can There Be Too Much of a Good Thing? (2016, background): “For instance, gains from collaboration are potentially 3 highest for firms with limited internal resources, such as small and medium-sized firms (SMEs), younger firms or firms that are overall financially constrained (Czarnitzki and Hottenrott 2011a; Lavie et al. 2010; Beckman et al. 2004).”
Do financial constraints threat the innovation process? Evidence from Portuguese firms (2011, background): “As an example, if we would be able to distinguish between "radical" from "routine" types of investment in R&D and innovations, then we could expect significant differences in the impact of financial constraints (Czarnitzki and Hottenrott, 2011b).”