R&D and Firm Performance in a Transition Economy

16 Pages Posted: 20 Oct 2006

See all articles by Dirk Czarnitzki

Dirk Czarnitzki

Centre for European Economic Research (ZEW); Catholic University of Leuven (KUL)

Kornelius Kraft

University of Dortmund - Department of Economics; IZA Institute of Labor Economics

Abstract

We estimate the effects of R&D on firms' credit ratings and on financial distress. The main purpose is the comparison of firms in Western Germany and Eastern Germany as a transitional economy. Innovative activity has a positive impact on firm value proxied by ratings in Western Germany, but a negative impact in Eastern Germany. We also consider future financial distress, and find that R&D in Eastern German firms leads to higher default risk. This stands in contrast to Western Germany where R&D enhances future performance. This result is highly politically relevant, since the high level of subsidies present in Eastern Germany may be subject to misallocation.

Suggested Citation

Czarnitzki, Dirk and Kraft, Kornelius, R&D and Firm Performance in a Transition Economy. Kyklos, Vol. 59, No. 4, pp. 481-496, November 2006, Available at SSRN: https://ssrn.com/abstract=938838 or http://dx.doi.org/10.1111/j.1467-6435.2006.00346.x

Dirk Czarnitzki

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
Mannheim, 68034
Germany

Catholic University of Leuven (KUL) ( email )

Faculty of Economics and Business
Naamsestraat 69
Leuven, 3000
Belgium
+32 16 326906 (Phone)
+32 16 325799 (Fax)

HOME PAGE: http://www.econ.kuleuven.be/msi/faculty_members.htm

Kornelius Kraft (Contact Author)

University of Dortmund - Department of Economics ( email )

D-44221 Dortmund
Germany
+49 231 755-3152 (Phone)
+49 231 755-3155 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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