Firm Innovation, Financial Constraints and Exports: Evidence From Indian SMEs

Abstract

Using rich firm-level data on 4517 small and medium-sized Indian manufacturing firms, we explore the implications of financial constraints on firm innovation and further investigate the interplay between financial constraints and export participation on firm innovation. Our findings highlight a negative association between firm innovation and financial constraints and a positive association between firm innovation and export. Moreover, we find that firms participating in international trade are well-positioned to offset the challenges of financial constraints on firm innovation.