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R&D, Innovation And Liquidity Constraints

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Executive Summary

The authors study the effect of financing constraints on the decision to do R&D and on the level of R&D investment using survey data and complete financial accounting data on a large number of Italian manufacturing firms from 2001 to 2003. They use a direct indicator of credit constraints and employ an econometric approach allowing for the existence of binding financing constraints to be endogenously determined. They find that there is a significantly negative effect on the probability to set up R&D activities due to the presence of financing constraints, ceteris paribus.

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