Strapped for Cash: The Role of Financial Constraints for Innovating Firms

Arbeitspapier

This paper makes use of a reform that allowed firms to use patents as stand-alone collateral, to estimate the magnitude of collateral constraints and to quantify the aggregate impact of these constraints on misallocation and productivity. Using matched firm-bank data for Norway, we find that bank borrowing increased for firms affected by the reform relative to the control group. We also find an increase in the capital stock, employment and innovation as well as equity funding. We interpret the results through the lens of a model of monopolistic competition with potentially collateral constrained heterogeneous firms. Parameterizing the model using well-identified moments from the reduced form exercise, we find quantitatively large gains in output per worker in the sectors in the economy dominated by constrained (and intangible-intensive) firms. The gains are primarily driven by capital deepening, whereas within-industry misallocation plays a smaller role.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10320

Classification and Topics

• Classification: Wirtschaft ; Intertemporal Firm Choice: Investment, Capacity, and Financing ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Firm Performance: Size, Diversification, and Scope ; Entrepreneurship ; Intellectual Property and Intellectual Capital ; Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
• Subject: intangible capital ; patents ; credit constraints ; misallocation ; productivity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bøler, Esther Ann ; Moxnes, Andreas ; Ulltveit-Moe, Karen Helene
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/271964
• Last update: 11.11.2002, 2:26 PM CET