Working Capital Optimization for R&D Activities in SMEs for Indian Suppliers

Abstract

In recent years, numerous scholars have highlighted how working capital optimization to investments in intangible capital might have a significant impact upon the pace of technological change, particularly for economies characterized by a distribution of supplier size heavily skewed towards small and medium enterprises. In this paper, we investigate the issue of working capital optimization to innovation in SMEs in India with respect to the future changes in the banking system. Our empirical analysis is twofold: first, we implement a probit model in order to observe if the indicators of R&D intensity still exert some significant impact on the probability of being denied (or not) additional credit. After deriving these results, which in general suggest a weak effect of the variables accounting for R&D intensity on the probability of a supplier declaring the need of additional financial resources, we perform a simulation on the potential impacts of the adoption of the capital requirements by Indian banks on lending conditions to small and medium enterprises innovation.