Credit constraints and R&D over the boom and bust: Firm-level evidence from Central and Eastern Europe |
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| Institution: | 1. Department of Economics, Business, Mathematics and Statistics, University of Trieste, Trieste, Italy;2. Department of Economics, University of Graz, Graz, Austria;3. Department of Economics and Statistics, University of Salerno, Fisciano (SA), Italy;4. Department of Political and Social Sciences, University of Trieste, Trieste, Italy;1. University of Beira Interior, Management and Economics Department, Research Unit in Business Science (NECE), Estrada do Sineiro, Pólo IV, 6200-209 Covilhã, Portugal;2. BRU-UNIDE and ISCTE-IUL Business School, Edifício II, Av. Prof. Aníbal Bettencourt, 1600-189 Lisboa, Portugal;3. Instituto Politécnico do Porto – ESTG Rua do Curral, Margaride, 4610-156 Felgueiras, Portugal;1. School of Business and Management, Queen Mary University of London, United Kingdom.;2. Othman Yeop Abdullah Graduate School of Business (OYAGSB), University Utara Malaysia, UUM, Sintok, Malaysia.;3. Nottingham University Business School, University of Nottingham, United Kingdom. |
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| Abstract: | This paper studies the effect of credit constraints on R&D over the recent boom and bust episode in Central and Eastern European countries (CEECs). Given that financial and venture capital markets in CEECs are thin in comparison to those in high-income economies, it is proposed that credit constraints have a significant adverse effect on R&D activity in these countries. The paper uses three waves of Business Environment and Enterprise Performance Survey (BEEPS) data between 2005 and 2013 on manufacturing firms from ten CEECs. We find that credit constraints have a substantial effect on R&D engagement, as the probability of credit constrained firms undertaking R&D activities is around 30 % lower than for other firms. The adverse effect of credit constraints for R&D emerges during the years of fast economic growth. |
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| Keywords: | R&D Credit constraints The Great recession Boom and bust Central and Eastern Europe |
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