Financing innovations

Both data sources contain information about sources of funding for innovations, but they report it differently. In the IET dataset, firms report percentage of funds, used to finance innovations, which was raised from a particular source. Therefore, summary statistics, which we report in this paper, correspond to the average number across firms. In the case of Goskomstat data, we do not have firm level information on financing sources, and report the break down of sources of finance, summed up across all firms.

Not surprisingly, both datasets show that retained earnings compose the largest share of innovation finance. In the Goskomstat data, the retail earnings share is equal to 87%. The corresponding number in the IET sample is 71%. Only 5% of all firms did not use retained earnings in the period of consideration. The share of government subsidies is almost negligible in both datasets: 3.6% in the Goskomstat data, of which the shares of federal and local governments are almost equal, and 2.4% in the IET data. About 91% of firms in the IET data did not have any government finance at all, although there are firms, which completely financed their innovations with the government funds. On a median firm, which received government funding, the share of such finance amounted to 15%. The share of foreign funding differs across datasets, and across years in the Goskomstat dataset. If in the 2000 Goskomstat book this share amounts to 6.5%, in 2001 it drops to 1.5%. In comparison, the average firm in the IET dataset finance only 0.5% of its spending on innovations with foreign investments. The maximum share of foreign finance reaches 63%, though, and the median firm, which receives foreign finance, covers 24% of its innovation spending from foreign investments. The IET dataset also provides information on banking credits: the share of banking finance in total funds, used for innovations, is 12% on average, but 43% among firms, which use banking finance. There are firms, which finance 100% of their innovation spending with banking finance. A small percentage of firms actively use credit from consumers of their products, or shareholders, to finance innovations. There are firms, which finance 100% of their innovation spending from these sources. The median firm, which receives credit from shareholders to finance innovations, gets 50% of its innovation spending financed from this source, and the median firm, which have access to credit from its consumers, covers 18% of its innovation expenditure from this source. Only two percent of firms in the sample ever used bond finance or issued new equity. Those, who did it, financed on average 24% of innovation expenditure from this source.