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The Financing of Research and Development

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  • Bronwyn H. Hall

Abstract

Evidence on the 'funding gap' for R&D is surveyed. The focus is on financial-market reasons for under-investment in R&D that persist even in the absence of externality induced under-investment. The conclusions are that (i) small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital; (ii) evidence for high costs of R&D capital for large firms is mixed, although these firms do prefer internal funds for financing these investments; (iii) there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets are not highly developed; and (iv) further study of governmental seed capital and subsidy programmes using quasi-experimental methods is warranted. Copyright 2002, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

Volume (Year): 18 (2002)
Issue (Month): 1 (Spring)
Pages: 35-51

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Handle: RePEc:oup:oxford:v:18:y:2002:i:1:p:35-51

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