Canepa, Alessandra; Stoneman, Paul --- "Financial Constraints on Innovation: A European Cross-Country Study" [2003] ELECD 82; in Waterson, Michael (ed), "Competition, Monopoly and Corporate Governance" (Edward Elgar Publishing, 2003)

Book Title: Competition, Monopoly and Corporate Governance

Editor(s): Waterson, Michael

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843760894

Section: Chapter 3

Section Title: Financial Constraints on Innovation: A European Cross-Country Study

Author(s): Canepa, Alessandra; Stoneman, Paul

Number of pages: 26

Extract:

3. Financial constraints on innovation:
a European cross-country study
Alessandra Canepa and Paul Stoneman

1. INTRODUCTION

If the subject of Keith Cowling's work is to be succinctly summarised, it
would be that his prime concern has been the functioning of capitalist econ-
omies and the design of policies to improve their performance. His inter-
ests have centred in particular upon European economies and European
policy. This chapter sits solidly within this area of interest. Its concerns are
with the performance of capital markets and such markets are at the centre
of the capitalist system. The orientation of the chapter is also very
European. Although policy issues are not explicitly explored, there are
implications.
The main aim of this chapter is to explore the impact of financial factors
upon the innovative performance of European firms. Particular issues to be
addressed are the relative importance of financial constraints versus other
constraints upon innovation, and whether the importance of financial
factors varies across firm sizes, industries and countries.
There has recently been extensive growth in the literature that looks at
the impact of financial factors upon the investment of firms in both fixed
capital and R&D (a common proxy for innovative performance). The
empirical aspect to this literature largely relies upon the econometric
exploration of firm or industry level panel data sets on investment and/or
R&D and firm and market characteristics, with financial factors being rep-
resented by the inclusion of a cash flow variable as an indicator ...