Research Information System
Borsa Istanbul Review, vol.26, no.3, 2026 (SSCI, Scopus)
This study explores how financial constraints shape firms’ innovation activities and capital structure choices when financing research and development (R&D). The main objective is to determine whether internal finance helps firms sustain R&D investment when access to external funds becomes limited, especially during periods of high inflation and economic instability. Examining firm-level data from Borsa Istanbul (BIST) covering 2010–2024, this study analyzes the link between internal cash flow and R&D spending. To address potential endogeneity and unobserved firm heterogeneity, several econometric methods are applied, including fixed effects and generalized method of moments (GMM) estimators. The findings indicate that internal finance is a key factor supporting R&D expenditures. In addition, R&D investment is not found to be significantly associated with long-term leverage, likely because R&D projects are risky and lack collateral value. Overall, this study highlights that macroeconomic stability and improved financing conditions are necessary to strengthen innovation in emerging markets.