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Capital structure and innovation: causality and determinants

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  • Eleonora Bartoloni

Abstract

It is widely recognized that a firm’s financial behaviour is the result of a complex mix of conditions, both internal and external to the firm; these may affect its investment decisions and its growth opportunities. This paper offers a twofold contribution to the empirical debate on the financing of innovation. First of all, it provides a comprehensive descriptions of possible simultaneous patterns which may affect a firm’s relevant dimensions, namely innovation inputs, innovation output, leverage and profitability. By using a Granger-Causality framework we will show that a firm’s leverage does not cause innovation output, as proxied by a measure of a firm’s successful innovation, while it is rather caused by successful innovation and a firm’s operating profitability. The second contribution is an original investigation of the determinants of a firm’s capital structure based on a panel of Italian firms which links the third Community Innovation Survey with an administrative data source providing economic and financial information collected from balance sheets and income statements referring to the period 1996–2003. This paper provides support for the pecking order theory as our firms are less indebted when operating profitability increases, but the use of external funding increases with their innovative effort. We also find support for the existence of credit constrains which seem to affect small innovative firms when compared with larger enterprises. Copyright Springer Science+Business Media, LLC. 2013

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  • Eleonora Bartoloni, 2013. "Capital structure and innovation: causality and determinants," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(1), pages 111-151, February.
    • Handle: RePEc:kap:empiri:v:40:y:2013:i:1:p:111-151
    DOI: 10.1007/s10663-011-9179-y
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    1. Francesco Campanella & Maria Rosaria Peruta & Manlio Giudice, 2017. "The Effects of Technological Innovation on the Banking Sector," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(1), pages 356-368, March.
    2. Eleonora Bartoloni & Maurizio Baussola, 2016. "Does technological innovation undertaken alone have a real pivotal role? Product and marketing innovation in manufacturing firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(2), pages 91-113, March.
    3. Yi Jiang & Richard S.J. Tol, 2024. "Does green innovation crowd out other innovation of firms? - based on the extended CDM model and unconditional quantile regressions," Working Paper Series 0124, Department of Economics, University of Sussex Business School.
    4. Simon Loretz & Socrates Mokkas, 2015. "Evidence for Profit Shifting with Tax-sensitive Capital Stocks," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(1), pages 1-36, March.
    5. Nakatani, Ryota, 2021. "Total factor productivity enablers in the ICT industry: A cross-country firm-level analysis," Telecommunications Policy, Elsevier, vol. 45(9).
    6. Athenia Bongani Sibindi, 2018. "Determinants of Bank Capital Structure: Evidence from South Africa," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 14(5), pages 108-126, OCTOBER.
    7. Shuanglian Chen & Zhehao Huang & Benjamin M. Drakeford & Pierre Failler, 2019. "Lending Interest Rate, Loaning Scale, and Government Subsidy Scale in Green Innovation," Energies, MDPI, vol. 12(23), pages 1-22, November.
    8. Daniel Anarfi & Danuše Nerudová, 2017. "Profit-Shifting Activities in the Mining Sector: Evidence from the Czech Republic," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 3(1), pages 5-12.
    9. Jun Du & Yama Temouri, 2015. "High-growth firms and productivity: evidence from the United Kingdom," Small Business Economics, Springer, vol. 44(1), pages 123-143, January.
    10. Eleonora Bartoloni, 2012. "The persistence of innovation: a panel data investigation on manufacturing firms," International Review of Applied Economics, Taylor & Francis Journals, vol. 26(6), pages 787-810, April.
    11. Katarzyna Prędkiewicz, 2017. "Attitude towards Innovation and Barriers in Capital Access," Central European Business Review, Prague University of Economics and Business, vol. 2017(2), pages 64-76.
    12. Liu, Zhiying & Hu, Kaili & Hussain, Ammar, 2023. "R&D disclosure and corporate innovation: Mediating role of financing structure," Finance Research Letters, Elsevier, vol. 56(C).
    13. Wirginia Doryn, 2014. "Finansowe determinanty deinternacjonalizacji polskich spó³ek akcyjnych w latach 2008-2011 / Financial determinants of de-internationalization of Polish joint-stock companies in 2008-2011," International Economics, University of Lodz, Faculty of Economics and Sociology, issue 7, pages 111-125, September.
    14. Bernardina Algieri & Antonio Aquino & Marianna Succurro, 2020. "The Impact of Cash-Flow and the Main Components of the Capital Structure on Innovative Performances of European Firms," Review of Economics and Institutions, Università di Perugia, vol. 11(1-2).
    15. Duan, Yunlong & Wang, Wannan & Zhou, Wei, 2020. "The multiple mediation effect of absorptive capacity on the organizational slack and innovation performance of high-tech manufacturing firms: Evidence from Chinese firms," International Journal of Production Economics, Elsevier, vol. 229(C).
    16. Chin, Tachia & Wang, Wannan & Yang, Meng & Duan, Yunlong & Chen, Yantai, 2021. "The moderating effect of managerial discretion on blockchain technology and the firms’ innovation quality: Evidence from Chinese manufacturing firms," International Journal of Production Economics, Elsevier, vol. 240(C).
    17. Cefis, Elena & Bartoloni, Eleonora & Bonati, Marco, 2020. "Show me how to live: Firms' financial conditions and innovation during the crisis," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 63-81.
    18. Yehui Tong & Zelia Serrasqueiro, 2020. "The Influential Factors on Capital Structure: A Study on Portuguese High Technology and Medium-High Technology Small and Medium-Sized Enterprises," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 23-35, July.
    19. Isabel‐María García‐Sánchez & Isabel Gallego‐Álvarez & José‐Luis Zafra‐Gómez, 2021. "Do independent, female and specialist directors promote eco‐innovation and eco‐design in agri‐food firms?," Business Strategy and the Environment, Wiley Blackwell, vol. 30(2), pages 1136-1152, February.
    20. Ana Milena Padilla Ospina & Jorge Alberto Rivera Godoy & Javier Humberto Ospina Holguín, 2015. "Determinantes de la estructura de capital de las mipymes del sector real participantes del Premio Innova 2007-2011," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 7(2), pages 359-380, July.
    21. Huacheng Rao & Dongxu Chen & Feichao Shen & Yangyang Shen, 2022. "Can Green Bonds Stimulate Green Innovation in Enterprises? Evidence from China," Sustainability, MDPI, vol. 14(23), pages 1-19, November.
    22. Mohammad Nayeem Abdullah & Emon Kalyan Chowdhury & Rahat Bari Tooheen, 2022. "Determinants of capital structure in banking sector: a Bangladesh perspective," SN Business & Economics, Springer, vol. 2(12), pages 1-19, December.
    23. Ryota Nakatani, 2024. "Food companies' productivity dynamics: Exploring the role of intangible assets," Agribusiness, John Wiley & Sons, Ltd., vol. 40(1), pages 185-226, January.
    24. Peng Xu & Heng Zhang & Guiyu Bai, 2019. "Research on the Differentiated Impact Mechanism of Parent Company Shareholding and Managerial Ownership on Subsidiary Responsive Innovation: Empirical Analysis Based on ‘Principal–Agent’ Framework," Sustainability, MDPI, vol. 11(19), pages 1-17, September.

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    More about this item

    Keywords

    Capital structure; Innovation; Profitability; Community innovation survey; Panel data; G32; O32; L25;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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