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Do Financing Constraints Matter for the Direction of Technical Change in Energy R&D?

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Listed:
  • Joelle Noailly
  • Roger Smeets

Abstract

The objective of this study is to examine the impact of firms’ financing constraints on innovation activities in renewable (REN) versus fossil-fuel (FF) technologies. Our empirical methodology relies on the construction of a firm-level dataset for 1,300 European firms over the 1995-2009 period combining balance-sheet information linked with patenting activities in REN and FF technologies. We estimate the importance of the different types of financing (e.g. cash flow, long-term debt, and stock issues) on firms’ patenting activities for the different samples of firms. We use count estimation techniques commonly used for models with patent data and control for a large set of firm-specific controls and market developments in REN and FF technologies. We find evidence for a positive impact of internal finance on patenting activities for the sample of firms specialized in REN innovation, while we find no evidence of this link for other firms, such as firms conducting FF innovation or large mixed firms conducting both REN and FF innovation. Hence, financing constraints matter for firms specialized in REN innovation but not for other firms. Our results have important implications for policymaking as the results emphasize that small innovative newcomers in the field of renewable energy are particularly vulnerable to financing constraints.

Suggested Citation

  • Joelle Noailly & Roger Smeets, 2019. "Do Financing Constraints Matter for the Direction of Technical Change in Energy R&D?," CIES Research Paper series 58-2018, Centre for International Environmental Studies, The Graduate Institute.
    • Handle: RePEc:gii:ciesrp:cies_rp_58
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    References listed on IDEAS

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    1. Laura Nowzohour, 2021. "Can Adjustments Costs in Research Derail the Transition to Green Growth ?," CIES Research Paper series 67-2021, Centre for International Environmental Studies, The Graduate Institute.

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    More about this item

    Keywords

    R&D; .;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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