Financial and knowledge barriers to innovation: Complementary and substitution effects on innovative effort |
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| Institution: | 1. Central Bank of Uruguay, Diagonal Fabini 777, 11100 Montevideo, Uruguay;2. University of the Republic, School of Economics and Administration, Institute of Economics, Gonzalo Ramírez 1926, 11200 Montevideo, Uruguay;1. Ohio State University, Columbus, Ohio, United States of America;2. Tilburg School of Economics and Management, Tilburg University, Tilburg, The Netherlands;1. Antai College of Economics and Management, Shanghai Jiao Tong University, People''s Republic of China;2. Warwick Business School, University of Warwick, United Kingdom of Great Britain and Northern Ireland;3. School of Management, Fudan University, People''s Republic of China;4. School of Computing, National University of Singapore, Republic of Singapore;1. Fox School of Business, Temple University, Philadelphia, PA 19122, United States of America;2. IESE Business School, Barcelona 08034, Spain;3. Nova School of Business and Economics, Universidade NOVA de Lisboa, Campus de Carcavelos, 2775-405 Carcavelos, Portugal;1. Federal Reserve Bank of Philadelphia, United States of America;2. Harvard Business School and NBER, United States of America;3. Harvard University, United States of America;4. Yale University, United States of America;1. Université Côte d''Azur, CNRS, GREDEG, 250 rue Albert Einstein - CS 10269, 06905 Sophia Antipolis Cedex, France;2. Université Toulouse 1 Capitole, TSM Research (UMR 5303 CNRS), Université Toulouse 1 Capitole/Toulouse School of Management, 2, rue du Doyen Gabriel Marty, 31042 Toulouse Cedex 9, France;3. Université de Bordeaux, BSE, Avenue Léon Duguit, 33608 Pessac Cedex, France;4. Université de Strasbourg, Université de Lorraine, CNRS, BETA, F- 67000 Strasbourg, 61, avenue de la Forêt Noire, 67085 Strasbourg Cedex, France |
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| Abstract: | Innovation studies have thoroughly analysed how firms' perception of barriers affects their innovative behaviour. We contribute to this line of research by analysing complementary and substitution effects between financial barriers, internal knowledge barriers and external knowledge barriers on firms' innovative effort. Using a panel data set of Uruguayan firms between 2006 and 2015, we add to empirical studies on this topic by estimating both unconditional and conditional complementary and substitution effects between these innovation barriers. We apply an econometric two-step specification that includes an estimation of instrumental variables, which allows us to control for endogeneity biases in the supermodularity and submodularity tests. We find significant evidence that external and internal knowledge barriers reinforce each other's effects (complementary effects), conditional on the absence of financial barriers. We also find that financial and internal knowledge barriers mitigate each other's effects (substitution effects) conditional on the firm's perception of external knowledge barriers. Additionally, we find substitution effects between financial and external knowledge barriers, conditional on the firm's perception of internal knowledge barriers. We discuss these results against the backdrop of Uruguayan innovation policies during the period studied, and stress the necessary articulation between instruments that will help strengthen firms' innovation management to recognize and manage innovation barriers. |
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