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Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 10 de 2011


Do Financial Constraints Threat the Innovation Process?

Evidence from Portuguese Firms

(Publicado em Economics of Innovation and New Technology 21(8): 701-736, 2012)

Filipe Silva
Faculdade de Economia/GEMF, Universidade de Coimbra

Carlos Carreira
Faculdade de Economia/GEMF, Universidade de Coimbra


This paper broadly addresses the financing problems of the innovation process, by analysing the extent to which financial constraints hinder firms' investment in R&D and innovation, as well as investigating the role of public financial support in alleviating such constraints. In order to overcome the problems associated with measuring financial constraints, we make use of both indirect and direct measures of constraints. Our findings suggest that while financial constraints have a perverse effect upon R&D investment and innovation, there is no evidence that subsidies mitigate such constraints. Accordingly, we raise a number of questions regarding the efficiency and effectiveness of subsidies in alleviating firms' financial constraints.

JEL Classification: O30; D92; G32; L00; L20.

Innovation; R&D investment; financial constraints; subsidies; Portugal.

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