Financial Constraints, Innovation, and Productivity
This thesis examines the relationships between financial constraints, innovation, and labour productivity among firms in eastern Europe and central Asia. To analyse the impact of financial constraint on firm-level innovation, this thesis follows the theoretical framework laid out by Gorodnichenko and Schnitzer (2013). Furthermore, using a multivariate probit model, financial constraints were found to decrease the likelihood of a firm introducing product, process, and production license innovations. The results also suggest that product, process, organizational, and production license innovation are complementary to each other (i.e., firms tend to introduce them together). The existence of complementarity among innovations may make it more difficult for financially constrained firms to successfully innovate. Findings also suggest that organizational and product innovations are at least positively correlated with firm labour productivity.