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R&D INVESTMENT, CREDIT RATIONING AND SAMPLE SELECTION
Author(s) -
Piga Claudio A.,
Atzeni Gianfranco
Publication year - 2007
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.0307-3378.2007.00255.x
Subject(s) - credit rationing , sample (material) , investment (military) , market liquidity , economics , selection (genetic algorithm) , monetary economics , investment decisions , microeconomics , rationing , production (economics) , interest rate , chemistry , chromatography , artificial intelligence , politics , political science , law , computer science , health care , economic growth
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.