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The Financing of Research and Development

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Author Info
Bronwyn H. Hall

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Abstract

Evidence on the 'funding gap' for R&D is surveyed. The focus is on financial market reasons for underinvestment in R&D that persist even in the absence of externality-induced underinvestment. The conclusions are that 1) small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital; 2) evidence for high costs of R&D capital for large firms is mixed, although these firms do prefer internal funds for financing these investments; 3) 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 4) further study of governmental seed capital and subsidy programs using quasi-experimental methods is warranted.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8773.

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Date of creation: Feb 2002
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Handle: RePEc:nbr:nberwo:8773

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Find related papers by JEL classification:
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

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  23. Jacques Mairesse & Bronwyn H. Hall & Benoit Mulkay, 1999. "Firm-Level Investment in France and the United States: An Exploration of What We Have Learned in Twenty Years," NBER Working Papers 7437, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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