Arbeitspapier
Investment, R&D and financial constraints in Britain and Germany
This paper tests for the importance of cash flow on investment in fixed capital and R&D using firm-level panel data in two countries between 1985 and 1994. For German firms, cash flow is not informative in simple econometric models of fixed investment or R&D. In identical pecifications for British firms, cash flow is informative about investment, although not about the level of R&D spending conditional on the R&D participation decision. In the UK, we also find that investment is less sensitive to cash flow for R&D-performing firms, and that cash flow predicts whether firms perform R&D or not. We confirm that these differences do not simply reflect a greater role for current cash flow in forecasting future sales. These results suggest that financial constraints are more significant in Britain, that they affect the decision to engage in R&D rather than the level of R&D spending by participants, and that consequently the British firms that do engage in R&D are a self-selected group where financing constraints tend to be less binding.
- Language
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Englisch
- Bibliographic citation
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Series: IFS Working Papers ; No. W99/05
- Classification
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Wirtschaft
Innovation and Invention: Processes and Incentives
Single Equation Models; Single Variables: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
Oligopoly and Other Imperfect Markets
- Event
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Geistige Schöpfung
- (who)
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Bond, Steve
Harhoff, Dietmar
Reenen, John Van
- Event
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Veröffentlichung
- (who)
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Institute for Fiscal Studies (IFS)
- (where)
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London
- (when)
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1999
- DOI
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doi:10.1920/wp.ifs.1999.9905
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Bond, Steve
- Harhoff, Dietmar
- Reenen, John Van
- Institute for Fiscal Studies (IFS)
Time of origin
- 1999