Machokoto, M. and Areneke, G. (2020) Does innovation and financial constraints affect the propensity to save in emerging markets? Research in International Business and Finance. 52 0275-5319.
| Item Type: | Article |
|---|---|
| Abstract: | Despite the surge in corporate savings and heightened interest in understanding the reasons for this behaviour, little is known about the forces behind this stylised phenomenon in emerging markets (EMs). Using a large sample of firms from nine African countries over the period 2001–2015, we posit and find that the propensity to save is higher in this context due to limited access to external finance. However, when we examine the effects of innovation on corporate savings, we find that the results are reversed as, relative to Non-R&D firms, R&D firms save less of their operating cash flow. This is in stark contrast to the extant literature in advanced economies, which shows that savings are essential to smoothen lumpy, irreversible and risky investments in innovation. We find this is due to the reversal in firm-specific factors, with R&D firms in this context being larger and more mature; hence, relying less on internal financing sources compared to young and less-mature R&D firms in advanced economies. We interpret our results as suggestive of the overarching influence of access to external finance as a major determinant of the propensity to save and deterrent to investing in innovation. Our finding helps explain the glut in innovation amongst small and young firms in emerging markets and calls for policies that promote innovation. |
| Uncontrolled Keywords: | Africa, Emerging markets, Financial constraints, Innovation, R&D, The propensity to save |
| Creators: | Machokoto, Michael and Areneke, Geofry |
| Faculties, Divisions and Institutes: | Faculties > Faculty of Business & Law > Accounting & Finance |
| Date: | 1 April 2020 |
| Date Type: | Publication |
| Journal or Publication Title: | Research in International Business and Finance |
| Volume: | 52 |
| Language: | English |
| DOI: | https://doi.org/10.1016/j.ribaf.2020.101185 |
| ISSN: | 0275-5319 |
| Status: | Published / Disseminated |
| Refereed: | Yes |
| Related URLs: | |
| URI: | http://nectar.northampton.ac.uk/id/eprint/12920 |
Actions (login required)
 |
Edit Item |
Altmetric
Altmetric