The Impact of Cash-Flow and the Main Components of the Capital Structure on Innovative Performances of European Firms

Bernardina Algieri, Antonio Aquino, Marianna Succurro


This study aims at investigating the impact of cash-flow, the main components of the capital structure, and R&D on innovative performances of firms, for seven EU countries. The analysis is carried out on data taken from the EU-Efige Survey, enriched with accounting data retrieved from the Amadeus Database (Bureau Van Dijk). We consider three measures of innovative performance: product innovations, process innovations and patents. The capital structure of the firms is evaluated through the short-term debt ratio, the long-term debt ratio and the equity to total assets ratio. We also include as explanatory variables in the econometric analysis R&D and a set of other control variables commonly employed in the empirical literature as determinants of firms’ innovative performance. The results reveal that internal financial resources (cash-flows) and R&D have the greatest importance for innovative performances; the availability of long-term bank loans, a significant export propensity and a greater firm size facilitate and stimulate firms to introduce new products and production processes. Some policy implications conclude the study.


Innovation; Patent; R&D; Capital structure; Probit model

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