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Effects of financial constraints on research and development investment: an empirical investigation

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  • Neslihan Ozkan
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    Abstract

    This paper investigates the behaviour of research and development (R&D) investment. How sensitive is R&D investmentto available cash flow for financially constrained and unconstrained firms? One important distinction between R&D investment and investment in physical capital is that the result of R&D investment can not serve as collateral, as it may be impossible to put a lien on R&D capital. Given that characteristic, one would expect R&D investment to be sensitive to cash flow, especially for financially constrained firms. Using Hall's Manufacturing Sector Master File, we show that R&D investment is more sensitive to internal finance for financially constrained firms than for financially unconstrained firms in the US manufacturing sector.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100110050734
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 12 (2002)
    Issue (Month): 11 ()
    Pages: 827-834

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    Handle: RePEc:taf:apfiec:v:12:y:2002:i:11:p:827-834

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    Web page: http://www.tandfonline.com/RAFE20

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    Cited by:
    1. P. Brighi & R. Patuelli & G. Torluccio, 2012. "Self-Financing of Traditional and R&D Investments: Evidence from Italian SMEs," Working Papers wp845, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Belin, Jean & Guille, Marianne, 2008. "Defence and firm financial structure in France," Review of Financial Economics, Elsevier, vol. 17(1), pages 46-61.
    3. Rozalia Pal & Roman Kozhan, 2008. "Firms' Investment under Financial Constraints: A Euro Area Investigation," Working Papers wp08-07, Warwick Business School, Finance Group.
    4. Fiaschi, Alessandro, 2008. "A note about credit rationing on research and development," MPRA Paper 12300, University Library of Munich, Germany, revised 10 Dec 2008.
    5. Yanrui Wu, 2012. "R&D Behaviour in Chinese Firms," Economics Discussion / Working Papers 12-26, The University of Western Australia, Department of Economics.

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