Financial constraints and innovation: Why poor countries don't catch up

Gorodnichenko, Yuriy und Schnitzer, Monika (2013): Financial constraints and innovation: Why poor countries don't catch up. In: Journal of the European Economic Association, Vol. 11, No. 5: pp. 1115-1152

Abstract

This paper examines micro-level channels through which financial development can affect such macroeconomic outcomes as level of income. Specifically, we investigate theoretically and empirically how financial constraints affect a firm’s innovation activities. Theoretical predictions are tested using unique firm survey data, which provide direct measures for innovations and firm-specific financial constraints, as well as information on shocks to firms’ internal funds that serve as firm-level instruments for financial constraints. We find unambiguous evidence that financial constraints restrain the ability of domestically owned firms to innovate and hence to catch up to the technological frontier.

• Item Type: Journal article
• Faculties: Economics; Economics > Chairs > Seminar for Comparative Economics
• Subjects: 300 Social sciences > 330 Economics
• Language: English