Relationship between Cash Flow, Bank Credit, Taxes, and Innovation

Abstract

Specialized literature has centered on analyzing the relationship between the entrepreneur and innovation, since the former is considered to be a driver for innovation. However, there are other factors that can influence innovation that should be considered: business cash flow, because it uses its own resources to innovate; bank credit, the possibility of accessing external financing; and taxes, which account for a reduction in businesses’ cash flow when they increase. The objective of this article is to analyze the existing relationship between these factors and innovation and the latter with growth. To achieve this, an empirical study has been carried out using a Partial Least Square (PLS) estimation with eleven European countries.