R&D INVESTMENT, CREDIT RATIONING AND SAMPLE SELECTION

We study whether R&D‐intensive firms are liquidity constrained, by modelling their antecedent decision to apply for credit. This sample selection issue is relevant when studying a borrower–lender relationship, as the same factors can influence the decisions of both parties. We find firms with no or low R&D intensity to be less likely to request extra funds. When they do, we observe a higher probability of being denied credit. Such a relationship is not supported by evidence from the R&D‐intensive firms. Thus, our findings lend support to the notion of credit constraints being severe only for a sub‐sample of innovative firms. Furthermore, the results suggest that the way in which the R&D activity is organized may differentially affect a firm's probability of being credit constrained.