We study whether R&D-intensive firms are liquidity constrained, by modelling their antecedent decision to apply for credit. This sample selection issue is relevant when studying a borrower-lender relationship, as the same factors can influence the decisions of both parties. We find firms with no or low R&D intensity to be less likely to request extra funds. When they do, we observe a higher probability of being denied credit. Such a relationship is not supported by evidence from the R&D-intensive firms. Thus, our findings lend support to the notion of credit constraints being severe only for a sub-sample of innovative firms. Furthermore, the results suggest that the way in which the R&D activity is organized may differentially affect a firm's probability of being credit constrained. 2007 The Authors. Journal compilation © 2007 Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research.
R&D investment, credit rationing and sample selection
Piga C.;
2007-01-01
Abstract
We study whether R&D-intensive firms are liquidity constrained, by modelling their antecedent decision to apply for credit. This sample selection issue is relevant when studying a borrower-lender relationship, as the same factors can influence the decisions of both parties. We find firms with no or low R&D intensity to be less likely to request extra funds. When they do, we observe a higher probability of being denied credit. Such a relationship is not supported by evidence from the R&D-intensive firms. Thus, our findings lend support to the notion of credit constraints being severe only for a sub-sample of innovative firms. Furthermore, the results suggest that the way in which the R&D activity is organized may differentially affect a firm's probability of being credit constrained. 2007 The Authors. Journal compilation © 2007 Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research.
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