Social and Behavioral Sciences Commons^™

Innovation And Finance: A Firm Level Analysis On Emerging Markets, Emily Zangrillo

Honors Theses

Economic theory suggests that the more financially constrained a firm, the lower its ability to allocate resources for innovation. I test this theory using firm-level survey data that covers 29 Eastern European and Central Asian countries. The survey is conducted in 2002, 2005, and 2009, and covers nearly 12,000 enterprises. I construct two baseline probit models to test the impact of financial constraints on firms’ ability to innovate a new product or upgrade an existing product. Existing literature suggests that the more financially constrained a firm, the less likely they are to innovate. Previous studies have also noted the reverse …