Financing Constraints for Industrial Innovation: What Do We Know?

24 Pages Posted: 8 Jun 2010

See all articles by Dirk Czarnitzki

Dirk Czarnitzki

KU Leuven - Department of Managerial Economics, Strategy, and Innovation; Centre for European Economic Research (ZEW)

Hanna Hottenrott

Technische Universität München (TUM)

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2010

Abstract

This article provides an overview of the most important insights from economic literature on private investment into research and development activity and how it may be constrained by market failure. The focus is on implications from empirical studies for the identification of financially constrained firms with respect to their innovative activities.

The empirical evidence for incentive and financing problems for private sector investment in innovation projects has provided ground for governmental interventions to prevent welfare reducing underinvestment in innovation. However, the survey of the literature shows that designing efficient policy schemes is not straightforward as government funds are scarce, and the impact of financial constraints on investment may differ substantially across firms, types of R&D projects and the organization of financial markets in different countries.

Keywords: Innovation, R&D, Financial Constraints, Innovation Policy

JEL Classification: O31, O32

Suggested Citation

Czarnitzki, Dirk and Hottenrott, Hanna, Financing Constraints for Industrial Innovation: What Do We Know? (May 1, 2010). Available at SSRN: https://ssrn.com/abstract=1621683 or http://dx.doi.org/10.2139/ssrn.1621683

Dirk Czarnitzki (Contact Author)

KU Leuven - Department of Managerial Economics, Strategy, and Innovation ( email )

Naamsestraat 69 bus 3500
Leuven, 3000
Belgium

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
Mannheim, 68034
Germany

Hanna Hottenrott

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

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