Do Financial Constraints Reduce Process Innovation? Evidence from Australian Firms

Roche, Siddarth, Sun, Sizhong, and Welters, Riccardo (2022) Do Financial Constraints Reduce Process Innovation? Evidence from Australian Firms. Economic Record, 98 (323). pp. 335-353.

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Accessing external finance for innovation is difficult. We study the effect of financial constraints on the probability of conducting process innovation, while also considering the role of past experience. We show a firm’s optimal process innovation decision is a function of its previous decision and financial constraints, which naturally leads to a set of population moments for empirical testing with Australian microdata from 2006 to 2018. We find that if a firm did not conduct process innovation previously, financial constraints reduce its probability of process innovation by around 10 per cent. Whereas with previous process innovation, financial constraints reduce the probability by around 12 per cent.

Item ID: 76733
Item Type: Article (Research - C1)
ISSN: 1475-4932
Copyright Information: © 2022 The Authors. Economic Record published by John Wiley & Sons Australia, Ltd on behalf of Economic Society of Australia. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Date Deposited: 15 Nov 2022 22:29
FoR Codes: 38 ECONOMICS > 3801 Applied economics > 380109 Industry economics and industrial organisation @ 100%
SEO Codes: 15 ECONOMIC FRAMEWORK > 1503 Management and productivity > 150306 Technological and organisational innovation @ 100%
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