Role of Credit Constraints on Product Quality: A Case Study of Turkey

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Author(s): Fatma Nur Karaman Kabadurmus (Yasar University, Turkey)and Sajal Lahiri (Southern Illinois University – Carbondale, USA)
Copyright: 2017
Pages: 38
Source title: Technological Integration as a Catalyst for Industrial Development and Economic Growth
Source Author(s)/Editor(s): Bryan Christiansen (PryMarke, LLC, USA)and Ülkü Yüksel (The University of Sydney Business School, Australia)
DOI: 10.4018/978-1-5225-2319-2.ch006

Keywords: Human Aspects of Technology / Information Science Reference / Social Sciences & Humanities / Socio-Economic Development

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Abstract

We analyze firms' investment on R&D in an imperfectly competitive setting. Our focus is on cost asymmetries in a duopoly model. The baseline model setting assumes firms invest in a quality ladder type of R&D process with probabilistic returns and have to borrow both at the innovation stage and the production stage. We find that if the firm is more efficient than the rival, effort on R&D will decrease less upon facing a common interest rate. We test our theoretical predictions using World Bank's Business Environment and Enterprise Performance Surveys (BEEPS, 2002, 2005) for Turkey.

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Role of Credit Constraints on Product Quality: A Case Study of Turkey

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