Using Dutch data we empirically investigate how financing and innovation vary across firm characteristics. We find that when firms face financial constraints, debt financing and innovation choices are not independent of firm characteristics, and R&D slows down. In the absence of financial...

Using a unique panel data of Dutch innovation and financial variables we empirically investigate how financing and innovation vary across firm characteristics. The study also tries to gauge the extent of market failure due to the presence of financing frictions. Our main findings can be...