Industrial research versus development investment: the implications of financial constraints
Year: 2010
Type: article
Abstract: Previous literature provided evidence on financing constraints for investment in research and development (R&D) activities due to capital market imperfections and special features of R&D investments. Moreover, it has been shown that a shift in capital structure towards more debt results in a reduction of R&D investments. This article complements this literature by compartmentalising R&D activities into its components, ‘R’ and ‘D’. In particular, we distinguish research from development as these activities not only differ in their nature but also, to a large extent, take place sequentially. Our results show that ‘R’ investment is more sensitive to a firms’ operating liquidity than ‘D’ indicating that firms have to rely even more on internal funds for financing their research compared with development activities. Moreover, we find that (basic) research subsidy recipients’ investment is less sensitive to internal liquidity.
Source: Cambridge Journal of Economics
DOI: 10.1093/cje/beq038
Authors: D. Czarnitzki, H. Hottenrott, S. Thorwarth
Institutions: Centre for European Economic Research, KU Leuven
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2149066469