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The Global Economic Crisis and Financial Crisis - Research Paper Example

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This paper explores the effects of the global economic crisis and recession on the innovation of European firms. The implication of the Current Global Financial Crisis on Innovation of Firms. Since innovation relies on resource allocation, it is likely to be affected by the current global financial crisis…
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The Global Economic Crisis and Financial Crisis
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Download file to see previous pages The mode of financing channels for European enterprises has been through bank loans and stock and bond market. In fact, most European banks have reviewed and tightened their money supply regulation due to the global financial crisis (Fasnacht,pg.73). These have affected cash flows to companies as more banks continue to engage in new business models that are geared towards stability amidst the crisis. Firms in these sectors are unable to commit resources on innovation activities due to the limited availability of credit and tightened lending rates from United Kingdom banks (Adair, Berry and Haran,pg.4). Most firms rely on profits and extra revenues for their research and development initiatives. Since the global economic meltdown is directly related to earnings of companies, any slight reduction in companies’ profits can affect their innovative approaches and incentives (Savona, Kirton and Oldani,pg.140). All business sectors and companies in Europe have felt the effect of the ongoing financial crisis in varying degrees thus leading to deterioration of their revenues and profitability. The reduction in financial results of European companies is linked to a reduction in consumerism, export cut back or reduction and shifting demand in domestic consumers. Cash flow and increased profitability and revenues are crucial for the survival of companies in relation to engagement in innovative activities. Robust and increased cash inflow in terms of profitability and increased revenues provide the safest protection of companies to engage in innovating. ...Download file to see next pages Read More
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