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Financial Constraints: Routine Versus Cutting Edge R&D Investment

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  • Binz, Hanna L.
  • Czarnitzki, Dirk

Abstract

We analyze financial constraints for R&D, where we account for heterogeneity among investments which has been neglected in previous literature. According to economic theory, investments should be distinguished by their degree of uncertainty, e.g. routine R&D versus cutting-edge R&D. Financial constraints should be more binding for cutting-edge R&D than for routine R&D. Using panel data we find that R&D spending of firms devoting a significant fraction of R&D to cutting-edge projects is curtailed by credit constraints while routine R&D investments are not. This has important policy implications with respect to the distribution of R&D subsidies in the economy.

Suggested Citation

  • Binz, Hanna L. & Czarnitzki, Dirk, 2008. "Financial Constraints: Routine Versus Cutting Edge R&D Investment," ZEW Discussion Papers 08-005, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:7016
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    More about this item

    Keywords

    R&D; Financial Constraints; Panel Data;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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