Financial Constraints for R&D and Innovation: New Evidence From a Survey Experiment

Dirk Czarnitzki*, Marek Giebel

*Corresponding author for this work

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Abstract

We utilize a survey experiment to evaluate the existence and degree of financial constraints for R&D. The experiment not only allows for the deduction of the presence of financial constraints but also for evaluating their economic significance. Using data on German companies, we find that financial constraints exist, but their relevance might have been overestimated in the literature. Most R&D projects that have not been implemented because of financial constraints seem to have low expected marginal rates of return. While this finding contrasts with other studies, we also find results that align with the literature: young firms are most constrained, and the constraints occur at the intensive margin, i.e. our results do not suggest that firms are deterred from innovation. Instead, highly innovative companies are restricted by the capital market. Small firms, in particular, had innovation projects in their portfolios that were not implemented.
Original languageEnglish
JournalApplied Economics
Number of pages21
ISSN0003-6846
DOIs
Publication statusPublished - 29 Oct 2024

Bibliographical note

Epub ahead of print. Published online: 29 October 2024.

Keywords

  • Innovation
  • R&D
  • Financial constraints
  • Survey experiment

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