Discussion Paper 17
Financial Constraints, Innovation Performance and Sectoral Disaggregation
Georgios Efthyvoulou1 and Priit Vahter2
1BIrmingham Business School, University of Birmingham, UK and University of Sheffield, UK
2BIrmingham Business School, University of Birmingham, UK, and University of Tartu, Estonia
How do the effects of financial constraints on innovation performance vary by sector and firm characteristics? This paper uses innovation survey data from eleven European countries to examine the heterogeneity of these effects. So far, there has been a lack of cross-country micro-level studies exploring the effects of financial constraints on innovation performance in Western Europe and only little research about the variability of such effects between the broad sectors of production and market services. Our results suggest that the impact of direct measures of financial barriers differs in production and services sectors, and also by the firm’s export orientation. In particular, financial constraints appear to have more pronounced negative effects in the production sector than in the services sector. Among different types of firms, the response to financial constraints seems to be stronger for non-exporters.
NOTE: This is an updated version of the paper previously entitled "Financial Constraints and Innovation Performance: Are all firms similar?"