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Show me how to live: Firms' financial conditions and innovation during the crisis

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  • Cefis, Elena
  • Bartoloni, Eleonora
  • Bonati, Marco

Abstract

This work evaluates how firms' financial conditions influence the relationship between firms' innovation and their survival during the recent economic crises. By using an original and integrated sample of 6542 Italian manufacturing firms, we show that, in general, innovation still grants a survival premium during recession times even when financial conditions moderate the relationship innovation-survival. We argue that firms' financial conditions do not eliminate the innovation premium in terms of survival, even if they reduce it. Firms introducing any kind of innovation and, in particular process innovations, still have higher probabilities than non-innovators to survive the crises even when their financial structure is taken into consideration. The reduction in the survival premium depends crucially on the financial variables considered. Leverage reduces most the innovation premium while the share of long-term debt reduces less – and in a certain case even increases – the survival premium from innovation.

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  • Cefis, Elena & Bartoloni, Eleonora & Bonati, Marco, 2020. "Show me how to live: Firms' financial conditions and innovation during the crisis," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 63-81.
    • Handle: RePEc:eee:streco:v:52:y:2020:i:c:p:63-81
    DOI: 10.1016/j.strueco.2019.10.001
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    1. Cefis, Elena & Coad, Alex & Lucini-Paioni, Alessandro, 2023. "Landmarks as lighthouses: firms' innovation and modes of exit during the business cycle," Research Policy, Elsevier, vol. 52(8).
    2. Edoardo Ferrucci & Roberto Guida & Valentina Meliciani, 2021. "Financial constraints and the growth and survival of innovative start‐ups: An analysis of Italian firms," European Financial Management, European Financial Management Association, vol. 27(2), pages 364-386, March.
    3. Oliver Cruz-Milan & Sergio Lagunas-Puls, 2021. "Effects of COVID-19 on Variations of Taxpayers in Tourism-Reliant Regions: The Case of the Mexican Caribbean," JRFM, MDPI, vol. 14(12), pages 1-23, December.
    4. Yan Han & Cheng Pan & Fengjun Jin, 2023. "Does the Improvement of the Business Environment Improve the Innovation Efficiency of Enterprises? Evidence from the Listed Companies in China," Sustainability, MDPI, vol. 15(14), pages 1-25, July.

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    More about this item

    Keywords

    Innovation; Firms’ survival; Financial constraints; Moderating effects; Cox Proportional Hazard model;
    All these keywords.

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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