Financial constraints to investing in intangibles: Do innovative and non-innovative firms differ?

This paper investigates the extent to which financial constraints on investments in intangible activities differ with respect to the kind of intangible and to the firms’ innovative status. Through an original pseudo-panel extension of a recent European Innobarometer survey, we are capable to address these research questions by attenuating the risks of reverse causality and simultaneity bias and to obtain interesting new results. Financial barriers significantly hamper the firms’ investments in intangibles with respect to R&D, design, software, and organisation or business process improvements. With respect to branding and reputation, and training, instead, financial constraints do not emerge to hinder the relative investments. Furthermore, while innovative firms tend to invest more in intangibles, the hampering role of financial barriers does not seem to differ between innovative and non-innovative firms. Financial barriers reduce firms’ investments in intangibles selectively, but the strength of this effect is the same in deterring and in restraining their possible innovative use by non-innovative and innovative firms, respectively.