Using newly available data at the firm level, this study provides convincing evidence of the importance of financial constraints in explaining the timing of innovations in the German services sector. Based on a dynamic model of firms' optimal R&D behavior under financial constraints, we estimate...

Endogenous innovation-based models of economic growth incorporate a scale effect predicting that larger economies grow faster and that population growth causes higher productivity growth. Recent models of semi-endogenous growth remove this scale effect but instead imply that productivity growth...