Financing constraints, R&D investments and innovative performances: new empirical evidence at the firm level for Europe

Abstract

The relationship between financing constraints, investments in research and development (R&D) and innovative performances has recently attracted renewed attention in the aftermath of a financial crisis that has led to problems of access to the credit on which innovation activities crucially rely. In spite of past developments in the theoretical analysis and in the data and methodologies for empirical investigation, some issues have remained unexplored to date. In this introduction to the special issue, we examine the contribution of the papers it contains, which provide new conceptualisations and empirical evidence at the firm level for Europe. Most previous research results, which were mainly based on extending models of financing constraints and physical investments to R&D investments, are confirmed, while new insights about this relationship are uncovered, in terms of the structural characteristics of the constrained firms, of the industries in which they operate, of their innovative activities and of the innovation outcomes they achieve. ARTICLE HISTORY

Financial constraints and public funding of eco-innovation: empirical evidence from European SMEs

“…As employees might leave, taking with them at least part of the company's knowledge-base, companies often spread R&D investments over a long period of time (Hall and Lerner, 2010). For all these reasons, the information asymmetries between investors and companies searching funds for their innovative projects are particularly severe, exacerbating the usual problems of opportunistic behaviors, adverse selection and moral hazard (Mina et al, 2013;Hall et al, 2016). In such contexts, evaluating the investments is extremely difficult and this has negative implications for companies both for their equity financing -because the supply of capital comes at a premium -and for their debt financing -because of the lack of collaterals associated with investments in intangible assets.…”

“…The issue of financing innovation has been extensively investigated by the literature (see Nanda andKerr, 2015, andHall et al, 2016 for recent reviews). Scholars have focused on the specific characteristics of R&D projects and on the consequences of such features in terms of existing constraints to fund innovations.…”

Innovation practices in emerging economies: Do university partnerships matter?

“…Neither theoretically nor empirically, there is a definitive justification and evidence about the effectiveness of public R&D subsidies in stimulating private/collaborative R&D as well as in resulting of significant and tangible outcomes (Greco et al 2016;Hall et al 2016). The proponents of R&D programs consider that subsidies enhance firm productivity, reinforce domestic economic growth, generate spillovers, and increase private R&D expenditures (Dimos and Pugh 2016).…”

“…As a result, subsidies reduce the fixed costs of other current and future research projects and increasing their probability of being completed or undertaken (Benavente et al 2007). The opponents of R&D programs argue that the subsidies are not diverted to the best firms because the selection of subsidized firms could influence by pressure groups (Hall et al 2016) or by the information asymmetry between firms and investor generates difficulties in measuring the private and social returns of R&D projects (Callahan et al 2012). In this point of view, some studies also recognized that the majority of subsidized firms are selected more on the basis of achieving political, economic and strategical government's purposes than on the basis of the project quality (Sissoko 2011).…”

‘Better late than never’: the interplay between green technology and age for firm growth

“…Similarly, young firms could be disfavoured in benefiting from policy instruments for the adoption of green-tech-such as new practices of green public procurement (Parikka-Alhola 2008)-as these are still marked by uncertainty and require experience in managing demand-pull policy. Third, given the hard collaterisation and information signalling of green investment projects, older firms could be expected to have better access to financing (Schneider and Veugelers 2010) and be better prepared to cope with the higher cost of eco-innovations without crowding out other growth-driving investments (Hall et al 2016). Last, but not the least, older firms may have an advantage in strengthening their available resources to increase their economic green returns (e.g.…”