The Impact of Financing Constraints on R&D Investment 
in Small and Medium-sized Enterprises (SMEs)

Lehua Wang

doi:10.70711/frim.v4i3.8738

The Impact of Financing Constraints on R&D Investment in Small and Medium-sized Enterprises (SMEs)

Lehua Wang

Abstract

This study examines the influence of financing constraints on research and development (R&D) investment in small and mediumsized enterprises (SMEs). Using panel data from 300 SMEs across manufacturing and technology sectors from 2015 to 2021, we analyze the
relationship between various financing constraint measures and R&D intensity. Our findings indicate that financing constraints significantly
reduce R&D investment, with this effect being more pronounced in younger firms and technology-intensive sectors. The study employs fixedeffects regression models and instrumental variable approaches to address potential endogeneity. Results suggest that improving access to
diverse financing sources could mitigate negative impacts on innovation activities in SMEs.

Keywords

Financing constraints; R&D investment; SME innovation; Financial frictions; Innovation policy

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DOI: http://dx.doi.org/10.70711/frim.v4i3.8738

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