Innovation and credit constraints: evidence from Swedish exporting firms

Using data from approximately 8300, primarily small, exporting firms in Sweden observed over the business cycle period 1997-2007, we examine the relationship between innovation and financial factors in a regression that include changes in cash holdings, cash flow and debt issues. Our nonlinear econometric approach with interaction variables between recession period, technology intensity and finance suggests that innovative firms in high-tech sectors tend to offset the effect of a negative financial shock by exploiting internal cash resources. No corresponding link between innovation and financial factors is found for medium and low-technology exporters.