Financial Constraints for Innovation in Brazil

Abstract

This paper analyzes the presence of financial constraints for investment in innovation in Brazil. Dynamic investment models are estimated for a panel dataset of 206 Brazilian non-financial firms in the period [1995][1996][1997][1998][1999][2000][2001][2002][2003][2004][2005][2006]. Results show that innovation of Brazilian firms is subject to financial constraints in line with previous international evidence. Innovation of Brazilian firms is adversely affected by leverage and also depends on internally generated funds. The models presented incorporate relevant firm characteristics for financial constraints. Our findings suggest the need for further advances at micro-and macroeconomic levels in Brazil to mitigate the observed financial constraints.RESUMEN. Este estudio analiza la existencia de restricciones que afectan las inversiones en el campo de la innovacio´n en Brasil. Los modelos de inversio´n dinámica fueron estimados para datos de panel que abarcaron 206 empresas no financieras brasileñas a lo largo del perı´odo 1995-2006. Los resultados muestran que, en Brasil, la innovacio´n de las empresas esta´sujeta a restricciones financieras, alineadas a pruebas internacionales ya existentes. La innovacio´n de una empresa brasileña se ve adversamente afectada por el apalancamiento dependiendo, además, tambie´n de los fondos que se generen internamente. Los modelos de estimacio´n incorporan caracterı´sticas importantes de la empresa inherentes a su restriccio´n financiera. Nuestras deducciones sugieren que, para 165 atenuar las restricciones financieras, es imprescindible que Brasil logre progresar aún más en los niveles micro y macroecono´micos.RESUMO. Este artigo analisa a presença de restrições financeiras para o investimento em inovação no Brasil. Modelos dinâmicos de investimento são estimados para um painel de dados composto por 206 empresas brasileiras não-financeiras no perı´odo de 1995-2006. Os resultados mostram que a inovação das empresas brasileiras está sujeita a restrições financeiras em conformidade com a evideˆncia internacional anterior. Inovação das empresas brasileiras e´afetada inversamente pelo endividamento e tambe´m depende de recursos gerados internamente. Os modelos apresentados incorporam caracterı´sticas relevantes da empresa relativamente a restrições financeiras. Nossos resultados sugerem a necessidade de avanço em mudanças adicionais nos nı´veis micro e macroeconômicos no Brasil com vistas a atenuar as restrições financeiras observadas.

Firm Size Matters for Financial Constraints: Evidence from Brazil

“…Although the Brazilian market has advanced since the mid-1990s, the country still has relatively high interest rates, low protection of minority shareholders and creditors, and high ownership concentration. Taken together with the inherent information asymmetry problem and international evidence, these characteristics support the proposition of the existence of financial constraints in Brazil in the direction of previous results (Crisóstomo, López-Iturriaga, & Vallelado, 2011;Moreira & Puga, 2000;Kalatzis, Azzoni, & Achcar, 2008;Terra, 2003). Therefore, based on this discussion, we formulate the following hypothesis regarding financial constraints for investment policy of Brazilian firms.…”

“…The international evidence has shown that smaller firms suffer more strongly the effect of market imperfections that lead to financial constraints. Such evidence, together with previous evidence in Brazil (Crisóstomo, López-Iturriaga, & Vallelado, 2011;Terra, 2003), lead us to the proposition of another hypothesis about firm size and financial constraints in the Brazilian market.…”

Impacts of credit constraints on innovation propensity and innovation performance: evidence from China and India

“…Researchers generally focus on the impact of credit constraints on innovative activities as a whole (Savignac 2008;Crisóstomo, López-Iturriaga, and Vallelado 2011). The effect of credit constraint conditions on the propensity to innovate may vary by the type of innovation.…”

Why say no to innovation? Evidence from industrial SMEs in European Union

“…Financial constraints that influence and harm innovations in SMEs are leverage, sensitiveness to cash flow and inability to maintain dividend payout (Crisóstomo, López-Iturriaga, and Vallelado 2011). As banks are one of the logical funding sources for SMEs and their innovation projects, researchers pointing out that asymmetric and unconvincing information characterizing innovation projects also troubles their development and the accessibility to bank loans.…”