Financial Constraint and R&D Investment: Evidence from CIS
Amaresh Tiwari, Pierre Mohnen, Franz Palm & Sybrand Schim van der Loeff
#2007-011
Using direct information on financial constraints from questionnaires,
rather than the commonly used balance sheet information, this paper
presents evidence that, controlling for traditional factors as size,
market share, cooperative arrangement, and expected profitability,
financial constraints affect a firm's decision of how much to invest in
R&D activities. Apart from these constraints, other hampering factors as
market uncertainty and institutional bottlenecks, regulations and
organizational rigidities also affect R&D investment. A semiparametric
estimator of sample selection is employed to control for potential
endogeneity of the regressors. The paper also shows that old firms and
firms that belong to a group are less financially constrained when it
comes to undertaking R&D activities. For the estimation a semiparametric
binary choice model is used.
UNU-MERIT Working Papers
ISSN 1871-9872