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The impact of the financial crisis on capital investments in innovative firms

Author

Listed:
  • Marek Giebel
  • Kornelius Kraft

Abstract

This article investigates the impact of the financial crisis on decisions by innovative versus non-innovative firms regarding capital investments. This question is of particular interest, as distortions of financial markets especially affect innovative firms (i.e., firms with riskier business models) and thereby impact economic growth. The empirical test is based on German establishment data for the years 2004–2011, thus before and during the recent financial crisis. It turns out that innovative firms using external sources for investment finance reduce their capital expenditures during the financial crisis to a larger extent than (i) non-innovative firms using external finance and (ii) innovative firms not using external finance. Moreover, our results remain robust when we control for demand-side factors, test for effects of other financing sources like equity, employ different definitions of the treatment status, or vary the sample size. Finally, our study implies that innovative firms with their presumably riskier business models clearly suffered during the financial crisis in terms of access to financial markets, leading to a reduction in capital investments.

Suggested Citation

  • Marek Giebel & Kornelius Kraft, 2019. "The impact of the financial crisis on capital investments in innovative firms," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 28(5), pages 1079-1099.
    • Handle: RePEc:oup:indcch:v:28:y:2019:i:5:p:1079-1099.
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    File URL: http://hdl.handle.net/10.1093/icc/dty050
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    Citations

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    Cited by:

    1. Malik, Muhammad Farhan & Nowland, John & Buckby, Sherrena, 2021. "Voluntary adoption of board risk committees and financial constraints risk," International Review of Financial Analysis, Elsevier, vol. 73(C).
    2. Isabel Busom & Jorge-Andrés Vélez-Ospina, 2021. "Subsidising innovation over the business cycle," Industry and Innovation, Taylor & Francis Journals, vol. 28(6), pages 773-803, July.
    3. Robert Lisowski & Maciej Woźniak & Paweł Jastrzębski & Simeon Karafolas & Marek Matejun, 2021. "Determinants of Investments in Energy Sector in Poland," Energies, MDPI, vol. 14(15), pages 1-17, July.
    4. Gregor Semieniuk & Emanuele Campiglio & Jean‐Francois Mercure & Ulrich Volz & Neil R. Edwards, 2021. "Low‐carbon transition risks for finance," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 12(1), January.
    5. Dirk Czarnitzki & Marek Giebel, 2021. "Financial Constraints for R&D and Innovation: New Evidence from a Survey Experiment," Working Papers of Department of Management, Strategy and Innovation, Leuven 683800, KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven.
    6. Machokoto, Michael & Bayai, Innocent & Kadzima, Marvelous, 2023. "The nonlinear impact of debt on employment: Does institutional quality matter?," Finance Research Letters, Elsevier, vol. 57(C).
    7. Spyros Arvanitis & Euripidis Loukis, 2024. "Factors Explaining Firm Economic Vulnerability During the 2008 Crisis," Journal of Industry, Competition and Trade, Springer, vol. 24(1), pages 1-41, December.

    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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