Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: Based on data from of 2,700 Swedish manufacturing firms, observed through the period 1997-2005, this paper shows that internal finance resources, measured by cash-flow, affect the propensity to apply for a patent as well as the number of patent applications. From a business cycle perspective, cash-flow only plays a role during and after economic contractions. In periods of economic expansion there is no significant association between internal finance and patent applications. Further, the sensitivity of patent applications to cash-flow is limited to firms with low equity-ratio. Among high equity firms the pattern of patent applications are robust over the business cycle.

Keywords: Financing constraints; Innovation; Intellectual property rights; Firm-level panel data

JEL-codes: G32; O31; O34

25 pages, October 9, 2009

Note: This is a substantially revised version of previously published CESIS Working paper (#194)

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