Do Financial Constraints Hold Back Innovation and Growth?

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http://hdl.handle.net/10138/135782
Title: Do Financial Constraints Hold Back Innovation and Growth?
Author: Hyytinen, Ari; Toivanen, Otto
Belongs to series: 9
ISBN: 951-555-745-3
Abstract: This paper provides evidence that capital market imperfections hold back innovation and growth, and that public policy can complement capital markets. We deliver the evidence by studying the effects of government funding on the behavior of SMEs in Finland. By adapting the methodology recently proposed by Rajan and Zingales (1998) to firm-level data, we show that government funding disproportionately helps firms from industries that are dependent on external finance. We demonstrate that the result is economically significant and robust to a variety of tests.
URI: http://hdl.handle.net/10138/135782
Date: 2002-09-17
Subject (ysa): corporate finance
financial constraints
innovation
firm growth
subsidies


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