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

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.