The effect of credit constraints on innovation activities during different economic conditions: firm-level evidence from Turkey
by Hülya Ünlü
International Journal of Business Innovation and Research (IJBIR), Vol. 29, No. 2, 2022

Abstract: This paper assesses to answer the question 'In the periods of during and after the recession, do the credit constraints affect the product innovation and R&D activity of manufacturing firms? ' Taking into consideration that Turkey is a developing country, the financing opportunity for innovative firms are narrower than the developed countries. This paper uses five waves of Business Environment and Enterprise Performance Survey (BEEPS) data between 2005 and 2019 on manufacturing firms and analyses by using an extended probit model with endogenous treatment. Results show that there is an endogenous effect between innovative activities and financial barriers. Additionally, findings support the hypothesis that the probability of being innovatively active is lowered about 40% by the effect of credit constraints. Most importantly, this paper has evidence that the effect of credit constraints differentiates during different economic conditions. To sum up, the pre-recession period is more affected than the post-recession period.

Online publication date: Mon, 10-Oct-2022

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