Financing Constraints for Industrial Innovation: What Do We Know?

24 Pages Posted: 8 Jun 2010  

Dirk Czarnitzki

Centre for European Economic Research (ZEW); Catholic University of Leuven (KUL)

Hanna Hottenrott

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE); Centre for European Economic Research (ZEW); KU Leuven - Faculty of Business and Economics (FEB)

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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)

Centre for European Economic Research (ZEW) ( email )

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

Catholic University of Leuven (KUL) ( email )

Faculty of Economics and Business
Naamsestraat 69
Leuven, 3000
Belgium
+32 16 326906 (Phone)
+32 16 325799 (Fax)

HOME PAGE: http://www.econ.kuleuven.be/msi/faculty_members.htm

Hanna Hottenrott

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1
Mannheim, 68034
Germany

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Leuven, 3000
Belgium

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