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The impact of financial constraints on firm R&D investments: empirical evidence from China.
- Source :
-
International Journal of Technology Management . 2014, Vol. 65 Issue 1-4, p172-188. 17p. - Publication Year :
- 2014
-
Abstract
- Innovation is essential for economic development and critical for firms to remain competitive. However, Chinese firms lag behind developed economies in terms of innovation, as measured by investments in R&D. R&D investments are more likely to be subject to financial constraints than ordinary investments as a result of higher risk and longer gestation periods. Using a unique World Bank survey of 12,400 manufacturing firms in China, this paper investigates the effects of financial constraints on firm R&D activities. We find that the access to a bank line of credit is positively and statistically significantly associated with firm R&D. We further use an exogenous shock of credit crunch caused by macroeconomic control policies in 2003-2004 to identify the effects of financial constraints on R&D. We find robust evidence that firms adversely shocked by the credit crunch reduced or even ceased R&D investments. Our findings highlight how financial constraints in fact reduce R&D investment in countries. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 02675730
- Volume :
- 65
- Issue :
- 1-4
- Database :
- Academic Search Index
- Journal :
- International Journal of Technology Management
- Publication Type :
- Academic Journal
- Accession number :
- 96132449
- Full Text :
- https://doi.org/10.1504/IJTM.2014.060949