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Do financial constraints threat the innovation process? Evidence from Portuguese firms

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  • Filipe Silva

    (Faculdade de Economia/GEMF, Universidade de Coimbra)

  • Carlos Carreira

    (Faculdade de Economia/GEMF, Universidade de Coimbra)

Abstract

This paper broadly addresses the financing problems of the innovation process, by analysing the extent to which financial constraints hinder firms' investment in R&D and innovation, as well as investigating the role of public financial support in alleviating such constraints. In order to overcome the problems associated with measuring financial constraints, we make use of both indirect and direct measures of constraints. Our findings suggest that while financial constraints have a perverse effect upon R&D investment and innovation, there is no evidence that subsidies mitigate such constraints. Accordingly, we raise a number of questions regarding the efficiency and effectiveness of subsidies in alleviating firms' financial constraints.

Suggested Citation

  • Filipe Silva & Carlos Carreira, 2011. "Do financial constraints threat the innovation process? Evidence from Portuguese firms," GEMF Working Papers 2011-10, GEMF, Faculty of Economics, University of Coimbra.
    • Handle: RePEc:gmf:wpaper:2011-10
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    References listed on IDEAS

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    More about this item

    Keywords

    innovation; R&D investment; financial constraints; subsidies; Portugal.;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L00 - Industrial Organization - - General - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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