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Financing Constraints for Industrial Innovation: What Do We Know?

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  • D. Czarnitzki
  • H. Hottenrot

Abstract

This article provides an overview of the most important insights from economic literature on private investment into research and development activity and how it may be constrained by market failure. The focus is on implications from empirical studies for the identification of financially constrained firms with respect to their innovative activities. The empirical evidence for incentive and financing problems for private sector investment in innovation projects has provided ground for governmental interventions to prevent welfare reducing underinvestment in innovation. However, the survey of the literature shows that designing efficient policy schemes is not straightforward because government funds are scarce, and the impact of financial constraints on investment may differ substantially across firms, types of R&D projects and the organization of financial markets in different countries.

Suggested Citation

  • D. Czarnitzki & H. Hottenrot, 2010. "Financing Constraints for Industrial Innovation: What Do We Know?," Review of Business and Economic Literature, Intersentia, vol. 55(3), pages 346-363, September.
    • Handle: RePEc:sen:rebelj:v:55:i:3:y:2010:p:346-363
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    Citations

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    Cited by:

    1. Giovanni Cerulli & Bianca Potì, 2014. "The Impact of Public Support Intensity on Business R&D: Evidence from a Dose-Response Approach," ERSA conference papers ersa14p625, European Regional Science Association.
    2. Costa-Campi, M.T. & Duch-Brown, N. & García-Quevedo, J., 2014. "R&D drivers and obstacles to innovation in the energy industry," Energy Economics, Elsevier, vol. 46(C), pages 20-30.
    3. García-Quevedo, José & Segarra-Blasco, Agustí & Teruel, Mercedes, 2018. "Financial constraints and the failure of innovation projects," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 127-140.
    4. José Ángel Zúñiga-Vicente & César Alonso-Borrego & Francisco J. Forcadell & José I. Galán, 2014. "Assessing The Effect Of Public Subsidies On Firm R&D Investment: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 36-67, February.
    5. Ben Said Hatem, 2016. "Factors Explaining Firm Investment: An International Comparison," International Business Research, Canadian Center of Science and Education, vol. 9(3), pages 112-120, March.
    6. Hanna Hottenrott & Bronwyn H. Hall & Dirk Czarnitzki, 2016. "Patents as quality signals? The implications for financing constraints on R&D," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(3), pages 197-217, April.
    7. García-Pérez-de-Lema, Domingo & Ruiz-Palomo, Daniel & Diéguez-Soto, Julio, 2021. "Analysing the roles of CEO's financial literacy and financial constraints on Spanish SMEs technological innovation," Technology in Society, Elsevier, vol. 64(C).
    8. Tavassoli, Sam & Karlsson, Charlie, 2015. "Persistence of various types of innovation analyzed and explained," Research Policy, Elsevier, vol. 44(10), pages 1887-1901.
    9. Pascal Aßmuth, 2018. "The Impact of Credit Rating on Innovation in a Two-Sector Evolutionary Model," Computational Economics, Springer;Society for Computational Economics, vol. 52(3), pages 839-872, October.
    10. Dirk Czarnitzki & Cindy Lopes-Bento, 2014. "Innovation Subsidies: Does the Funding Source Matter for Innovation Intensity and Performance? Empirical Evidence from Germany," Industry and Innovation, Taylor & Francis Journals, vol. 21(5), pages 380-409, July.
    11. Sasidharan, Subash & Jijo Lukose, P.J. & Komera, Surenderrao, 2015. "Financing constraints and investments in R&D: Evidence from Indian manufacturing firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 28-39.
    12. Sancho-Bosch, Diego & Guerrero, Alex J. & Heijs, Joost, 2022. "Technology policy evaluation: The interaction between the financial constraint of firms and level of financial additionality," MPRA Paper 114659, University Library of Munich, Germany.
    13. Ivano D'Antonio & Alessandro De Iudicibus & Giuseppe Piroli & Francesco Savoia, 2014. "Ricerca e innovazione in campania: una valutazione controfattuale della politica di coesione," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2014(113), pages 61-87.
    14. Georgios Efthyvoulou & Priit Vahter, 2016. "Financial Constraints, Innovation Performance and Sectoral Disaggregation," Manchester School, University of Manchester, vol. 84(2), pages 125-158, March.
    15. Zhiying Zhang & Hua Cheng & Yabin Yu, 2020. "Relationships among Government Funding, R&D Model and Innovation Performance: A Study on the Chinese Textile Industry," Sustainability, MDPI, vol. 12(2), pages 1-20, January.
    16. Bettina Becker, 2013. "The Determinants of R&D Investment: A Survey of the Empirical Research," Discussion Paper Series 2013_09, Department of Economics, Loughborough University, revised Sep 2013.
    17. 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.
    18. Giebel, Marek & Kraft, Kornelius, 2021. "Subsidies and innovation in the recent financial crisis," ZEW Discussion Papers 21-097, ZEW - Leibniz Centre for European Economic Research.
    19. Ganter, Alois & Hecker, Achim, 2013. "Persistence of innovation: Discriminating between types of innovation and sources of state dependence," Research Policy, Elsevier, vol. 42(8), pages 1431-1445.
    20. Marta F. Arroyabe & Martin Schumann, 2022. "On the Estimation of True State Dependence in the Persistence of Innovation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(4), pages 850-893, August.
    21. Giebel, Marek & Kraft, Kornelius, 2020. "R&D investment under financing constraints," ZEW Discussion Papers 20-018, ZEW - Leibniz Centre for European Economic Research.
    22. Aruna Pain & Indrani Chakraborty, 2023. "What Factors are Driving R&D in the Pharmaceutical Industry in India? A Study of the Post-Liberalization Period," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(3), pages 617-640, September.

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