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Ownership Structure and R&D Investment of Japanese Start-up Firms

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Author Info
Okamuro, Hiroyuki
Zhang, Jian Xiong
Abstract

In this paper, we analyze the influence of ownership structure on the research and development (R&D) investment of start-up firms. Previous studies on the relationship between ownership and R&D have concentrated on the large, established firms listed on the stock market and have focused on the concentration of ownership, regardless of the types of large shareholders. We argue that the type of large shareholders is an important factor in promoting R&D investment under asymmetric information and that R&D projects, particularly those of start-up firms, strongly depend on the financing received from venture capital firms and main banks. Using a unique data set of the Japanese start-up firms in the 1990s, we found that, even after controlling for the innovativeness prior to the venture capital firm or main bank relationship, the shareholding by venture capital firms and main banks have, in fact, positive and significant effects on the R&D investment of start-up firms.

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Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2006-1.

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Length: 25 p.
Date of creation: Jun 2006
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Handle: RePEc:hit:hitcei:2006-1

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Related research
Keywords: R&D; Ownership Structure; Start-up Firms; Venture Capital; Main Bank;

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Find related papers by JEL classification:
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D

References listed on IDEAS
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    Other versions:
  4. Aoki, Masahiko, 1990. "Toward an Economic Model of the Japanese Firm," Journal of Economic Literature, American Economic Association, vol. 28(1), pages 1-27, March. [Downloadable!] (restricted)
  5. Brian J. Hall & David E. Weinstein, 1996. "The Myth of the Patient Japanese: Corporate Myopia and Financial Distress in Japan and the U.S," Harvard Institute of Economic Research Working Papers 1770, Harvard - Institute of Economic Research.
    Other versions:
  6. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier. [Downloadable!] (restricted)
  7. Kaoru Hosono & Masayo Tomiyama & Tsutomu Miyagawa, 2004. "Corporate governance and research and development: evidence from Japan," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 13(2), pages 141-164, March. [Downloadable!] (restricted)
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  10. Hellmann, Thomas & Puri, Manju, 2000. "The Interaction between Product Market and Financing Strategy: The Role of Venture Capital," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 13(4), pages 959-84.
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  13. Engel, Dirk & Keilbach, Max, 2007. "Firm-level implications of early stage venture capital investment -- An empirical investigation," Journal of Empirical Finance, Elsevier, vol. 14(2), pages 150-167, March. [Downloadable!] (restricted)
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  14. Sheard, Paul, 1989. "The main bank system and corporate monitoring and control in Japan," Journal of Economic Behavior & Organization, Elsevier, vol. 11(3), pages 399-422, May. [Downloadable!] (restricted)
  15. Thomas Hellmann, 1998. "The Allocation of Control Rights in Venture Capital Contracts," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 57-76, Spring. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gennaioli, Nicola & Rossi, Stefano, 2008. "Judicial Discretion in Corporate Bankruptcy," CEI Working Paper Series 2008-5, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  2. Gennaioli, Nicola & Rossi, Stefano, 2008. "Optimal Resolutions of Financial Distress by Contract," CEI Working Paper Series 2008-6, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
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