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Financial constraints and the cyclical pattern of digitalization in manufacturing firms

Author

Listed:
  • Dolores Añon Higón

    (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain))

  • Juan A. Máñez

    (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain))

  • Amparo Sanchis

    (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain))

  • Juan A. Sanchis

    (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain))

Abstract

We examine how financial constraints influence the digitalization of Spanish manufacturing firms, taking into account the business cycle. Our study covers a representative sample of Spanish manufacturing firms from 2001 to 2017. We offer empirical insights into the moderating role of the business cycle on the impact of financial constraints on firms’ digitalization efforts, distinguishing between large firms and small and medium-sized enterprises (SMEs). We build a firm-year financial score aimed to mirror the extent of financial constraints, and a synthetic index of digitalization, both at the firm level. We estimate a panel data specification for firms’ digitalization intensity using a fractional response method. Our findings highlight that financial constraints pose a hurdle to digitalization, particularly for SMEs, and show that firms’ digitalization exhibits a counter-cyclical pattern, both for SMEs and large firms.

Suggested Citation

  • Dolores Añon Higón & Juan A. Máñez & Amparo Sanchis & Juan A. Sanchis, 2025. "Financial constraints and the cyclical pattern of digitalization in manufacturing firms," Working Papers 2502, Department of Applied Economics II, Universidad de Valencia.
    • Handle: RePEc:eec:wpaper:2502
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    More about this item

    Keywords

    Digitalization; manufacturing firms; financial constraints; business cycle;
    All these keywords.

    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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