R&D Financing Constraints of Young and Old Innovation Leaders in the EU and the US

Using firm level information on the world leading R&D investors, this paper investigates through a system GMM estimation of the investment error correction model, whether younger innovators face more severe or no financing constraints, as opposed to older innovators, and whether this would hold more for European young firms relative to the US. The analysis indeed confirms that over the last decade young leading innovators appear to be more affected by financing constraints compared to their older counterparts and that particularly EU young innovators exhibit higher sensitivities of R&D investment to cash-flow, particularly in medium and high tech sectors.