The impact of appropriability conditions and financial crisis on financing constraints for industrial research and development.

R&D has been recognized as important input factor to industrial production. Potential under-investment may have detrimental effects on competitiveness, on job creation and long-run economic performance. Reasons for under-investment are generally regarded to stem from two sources of market failure that reduce incentives for private investments in R&D. First, private returns to R&D are lower than social returns due to knowledge spillovers and hence limited appropriability of returns. Second, capital market imperfections may lead to financing constraints. Research has led to two streams of literature that address these aspects as two separate issues. The proposed research aims to fill this gap by explicitly focusing on how appropriability conditions and financing constraints interact. This interrelation of intellectual property (IP) and financing conditions is nowadays probably more important than it used to be. First, IP may serve as an asset that provides some form of collateral value for potential investors. Second, IP can serve as signal for future revenue streams that can be realized through licensing out the patented technology. IP may signal entrepreneurial quality reducing information asymmetries. However, financing constraints may prevent firms from successfully protecting their IP. Moreover, very recent data will allow investigating how the current economic downturn affects these relations.

Keywords:Innovation, R&D, Patents, Intellectual property, Financial constraints

Disciplines:Applied economics, Economic history, Macroeconomics and monetary economics, Microeconomics, Tourism