Financial constraints, R&D investment and uncertainty: new evidence from the Italian automotive supply chain

ABSTRACT

Considering the Italian automotive supply chain, this work investigates the relation between investments in R&D and financial constraints, unpacking the expected uncertainties in the innovation process, and highlighting the most relevant factors that might prevent access to external financial resources. We use new information from a survey presented to a sample of firms between 2018 and 2021, adopting a logistic regression model and several robustness checks to test the proposed hypotheses. Based on our results, we identify two relevant scenarios characterised by the presence of market and regulatory uncertainty (first scenario), and financial uncertainty (second scenario). We estimate that the odds of being under financial constraints are 4.02 times in the former scenario, while they are 10.13 times in the latter scenario. Policy implications concern the opportunity to work on the key elements of these scenarios to facilitate the financing of R&D investments and innovation, which might well be fundamental to achieve the targets set by the Paris Agreement on climate change. Managerial practical implications concern the identification of the essential conditions necessary in R&D proposals to collect financial resources on the capital market.

KEYWORDS:

• Automotive supply chain
• financial constraints
• R&D
• innovation
• investment
• uncertainty

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The Italian automotive supply chain is an interesting case study and a good candidate to test the proposed research question since it is an environment characterized by high uncertainty, due to the current green policies and the new regulations adopted by the policy makers (Pardi 2021).

2 Most of the works have to rely on proxies estimated on balance sheet and other financial/economic statements, which might be subject to interpretation problems (Savignac 2008).

3 The sample does not refer exclusively to NACE code 29, but it includes all the firms working for the automotive supply chain (Moretti and Zirpoli 2021), with a resulting sample of more than 2,000 entities.

4 This observatory and its national survey are a joint initiative by the Chamber of Commerce of Turin, the Italian National Association of the Automotive Supply Chain (ANFIA), and the Center for Automotive and Mobility Innovation (CAMI) of Ca’ Foscari University, Venice. See www.to.camcom.it/osservatorio-sulla-componentistica-automotive-italiana .

5 CERIS Rating estimates credit rating scores by means of a neural network algorithm based on key information extracted from the financial statements of firms (see Manello and Calabrese, 2017; Falavigna and Ippoliti 2022a, 2022b).

6 Following the assessment system of Standard & Poor’s, this rating system classifies companies into 8 credit rating classes.

7 Supplemental online material presents some additional evidence, highlighting the representativeness of the sample under investigation (Table A.1).

8 Supplemental online material presents the additional robustness checks (Tables A.2 and A.3), as well as the correlation matrix (Table A.4).

9 According to Andrieu, Staglianò, and Van Der Zwan (2018), a complementary effect between trade credits and financial debts might exist, since suppliers have better information on their clients and financial institutions can observe this credit channel to fill their information gap and grant access to their resources.

Additional information

Notes on contributors

G. G. Calabrese

G. G. Calabrese is director of research at CNR-IRCrES, editor in chief of the International Journal of Automotive Technology and Management and member of the International Steering Committee of GERPISA. His main research areas include the automotive supply chain and its technological innovation.

G. Falavigna

G. Falavigna is senior researcher at CNR-IRCrES, associate editor of the Journal of Public Affair and lecturer in Political Economy at the Polytecnic of Turin. Her main research areas include complex systems and evaluation of firms’ performance.

R. Ippoliti

R. Ippoliti is J.-Prof. for Law and Economics at Bielefeld University, and associate editor of the Journal of Public Affair. His main research areas include institutional efficiency and firms’ behaviour.