To read this content please select one of the options below:

Do financial constraints moderate the relationship between innovation subsidies and firms' R&D investment?

Enrique Acebo (Department of Management and Business Economy, University of León, León, Spain)
José-Ángel Miguel-Dávila (Department of Management and Business Economy, University of León, León, Spain)
Mariano Nieto (Department of Management and Business Economy, University of León, León, Spain)

European Journal of Innovation Management

ISSN: 1460-1060

Article publication date: 30 December 2020

Issue publication date: 16 February 2022

595

Abstract

Purpose

The purpose of this paper is to analyse whether the effect of innovation subsidies on firms' R&D investment varies depending on whether the firm is suffering from financial constraints.

Design/methodology/approach

To address this analysis, the authors provide a theoretical model and test their hypothesis using an econometric analysis of an unbalanced panel of 3,865 innovative Spanish firms during 2010–2017. They employ the SABI database to obtain firms' financial and economic data and incorporate firms' MORE financial rating. Specifically, the authors use the GMM-SYS technique to regress and measure the marginal effects of innovation subsidies size on firms' R&D investment and the influence of firms' financial constraints.

Findings

The results of this work indicate that financial constraints negatively moderate the effect of subsidies on R&D investment; that is, those firms that receive a subsidy and suffer financial constraints invest less in R&D projects than those which also receive the subsidy and do not suffer financial constraints. Besides, this work found that innovation subsidies alone do not significantly increase firms' R&D investment.

Originality/value

From a neoclassical point of view, the existence of financial constraints is the justification of public innovation policies. However, due to the difficulty of measuring financial constraints, innovation literature has abandoned the analysis of this crucial variable. This work reintroduces this vital variable and analyses how it interacts with innovation subsidies on firms' R&D investment.

Keywords

Acknowledgements

Funding: This work is supported by the Spanish Ministry of Science, Innovation and Universities under grants FPU18/00343 and PID2019-105140RB-I00.

Citation

Acebo, E., Miguel-Dávila, J.-Á. and Nieto, M. (2022), "Do financial constraints moderate the relationship between innovation subsidies and firms' R&D investment?", European Journal of Innovation Management, Vol. 25 No. 2, pp. 347-364. https://doi.org/10.1108/EJIM-07-2020-0286

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

Related articles