TY - JOUR
T1 - Industrial research versus development investment
T2 - The implications of financial constraints
AU - Czarnitzki, Dirk
AU - Hottenrott, Hanna
AU - Thorwarth, Susanne
N1 - Funding Information:
Manuscript received 10 August 2009; final version received 20 July 2010. Address for correspondence: Dirk Czarnitzki, K.U. Leuven, Department of Managerial Economics, Strategy and Innovation, Naamsestraat 69, 3000 Leuven, Belgium; email: [email protected] * K.U. Leuven, Belgium and Centre for European Economic Research (ZEW), Mannheim, Germany. We thank IWT Flanders for providing their ICAROS database. DC gratefully acknowledges financial support from the Flemish Science Foundation (grant G.0534-07N). We also thank two anonymous referees as well as conference participants at the EARIE in Ljubljana and the DRUID in London for their helpful comments.
PY - 2011/5/1
Y1 - 2011/5/1
N2 - 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.
AB - 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.
KW - Innovation policy
KW - Liquidity constraints
KW - Research and development
UR - http://www.scopus.com/inward/record.url?scp=79955782655&partnerID=8YFLogxK
U2 - 10.1093/cje/beq038
DO - 10.1093/cje/beq038
M3 - Article
AN - SCOPUS:79955782655
SN - 0309-166X
VL - 35
SP - 527
EP - 544
JO - Cambridge Journal of Economics
JF - Cambridge Journal of Economics
IS - 3
ER -