Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Financing of Research and Development

Contents:

Author Info

  • Bronwyn H. Hall

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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w8773.pdf
Download Restriction: no

Bibliographic Info

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

as in new window
Length:
Date of creation: Feb 2002
Date of revision:
Publication status: published as Bronwyn H. Hall, 2002. "The Financing of Research and Development," Oxford Review of Economic Policy, Oxford University Press, vol. 18(1), pages 35-51, Spring.
Handle: RePEc:nbr:nberwo:8773

Note: CF PR
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Lach, Saul & Schankerman, Mark, 1989. "Dynamics of R&D and Investment in the Scientific Sector," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 880-904, August.
  2. Hall, Bronwyn H. & Mairesse, Jacques & Mulkay, Benoit, 1998. "Firm Level Investment in France and the United States: An Exploration of What We Have Learned in Twenty Years," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt5tp4r5nm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Colin Mayer & Wendy Carlin, 1999. "Finance, Investment and Growth," Economics Series Working Papers, University of Oxford, Department of Economics 1999-FE-09, University of Oxford, Department of Economics.
  4. F. M. Scherer, 1998. "The Size Distribution of Profits from Innovation," Annales d'Economie et de Statistique, ENSAE, issue 49-50, pages 495-516.
  5. Hall, Bronwyn H. & Mairesse, Jaques & Branstetter, Lee & Crepon, Bruno, 1998. "Does Cash Flow Cause Investment and R&D: An Exploration Using Panel Data for French, Japanese, and United States Scientific Firms," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt11v204tz, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  6. Richard R. Nelson, 1959. "The Simple Economics of Basic Scientific Research," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 67, pages 297.
  7. Michael J. Alderson & Brian L. Betker, 1996. "Liquidation Costs and Accounting Data," Financial Management, Financial Management Association, Financial Management Association, vol. 25(2), Summer.
  8. Bronwyn H. Hall & Zvi Griliches & Jerry A. Hausman, 1984. "Patents and R&D: Is There A Lag?," NBER Working Papers 1454, National Bureau of Economic Research, Inc.
  9. Engel, Dirk, 2001. "Höheres Beschäftigungswachstum durch Venture Capital?," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 01-34, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  11. Paul A. David & Bronwyn H. Hall & Andrew A. Toole, 2005. "Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence," Development and Comp Systems, EconWPA 0502011, EconWPA.
  12. Bronwyn H. Hall & John van Reenen, 1999. "How Effective are Fiscal Incentives for R&D? A New Review of the Evidence," NBER Working Papers 7098, National Bureau of Economic Research, Inc.
  13. Dewatripont, Mathias & Tirole, Jean, 1994. "A Theory of Debt and Equity: Diversity of Securities and Manager-Shareholder Congruence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(4), pages 1027-54, November.
  14. Josh Lerner & Alexander Tsai, 2000. "Do Equity Financing Cycles Matter? Evidence from Biotechnology Alliances," NBER Working Papers 7464, National Bureau of Economic Research, Inc.
  15. Klette, Tor Jakob & Moen, Jarle & Griliches, Zvi, 2000. "Do subsidies to commercial R&D reduce market failures? Microeconometric evaluation studies1," Research Policy, Elsevier, Elsevier, vol. 29(4-5), pages 471-495, April.
  16. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, Elsevier, vol. 47(3), pages 243-277, March.
  17. Yasushi Hamao & Frank Packer & Jay R. Ritter, 1998. "Institutional affiliation and the role of venture capital: evidence from initial public offerings in Japan," Staff Reports, Federal Reserve Bank of New York 52, Federal Reserve Bank of New York.
  18. Klette, T.J. & Moen, J. & Griliches, Z., 1999. "Do Subsidies to Commercial R&D Reduce Market Failures? Microeconometric Evaluation Studies," Papers, Norwegian School of Economics and Business Administration- 16/99, Norwegian School of Economics and Business Administration-.
  19. Johnson, Mark S & Rao, Ramesh P, 1997. "The Impact of Antitakeover Amendments on Corporate Financial Performance," The Financial Review, Eastern Finance Association, Eastern Finance Association, vol. 32(4), pages 659-89, November.
  20. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 91(364), pages 907-18, December.
  21. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  22. Samuel Kortum & Josh Lerner, 2000. "Assessing the Contribution of Venture Capital to Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 674-692, Winter.
  23. Steven N. Kaplan & Per Stromberg, 2000. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts," NBER Working Papers 7660, National Bureau of Economic Research, Inc.
  24. Paul A. Gompers & Josh Lerner, 1999. "What Drives Venture Capital Fundraising?," NBER Working Papers 6906, National Bureau of Economic Research, Inc.
  25. Bhattacharya, Sudipto & Ritter, Jay R, 1983. "Innovation and Communication: Signalling with Partial Disclosure," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 50(2), pages 331-46, April.
  26. Bharat N. Anand & Alexander Galetovic, 2000. "Weak Property Rights and Holdup in R&D," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 9(4), pages 615-642, December.
  27. Harhoff, Dietmar, 1996. "Are there financing constraints for R&D and investment in German manufacturing firms?," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 96-28, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  28. Anuradha Nagarajan & Sumit K. Majumdar, 1997. "The Impact of Changing Stock Ownership Patterns in the United States : Theoretical Implications and Some Evidence," Revue d'Économie Industrielle, Programme National Persée, Programme National Persée, vol. 82(1), pages 39-54.
  29. Philippe Aghion & Peter Howitt, 1997. "Endogenous Growth Theory," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262011662, December.
  30. Bhagat, Sanjai & Welch, Ivo, 1995. "Corporate research & development investments international comparisons," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 19(2-3), pages 443-470, April.
  31. Zantout, Zaher Z, 1997. "A Test of the Debt-Monitoring Hypothesis: The Case of Corporate R&D Expenditures," The Financial Review, Eastern Finance Association, Eastern Finance Association, vol. 32(1), pages 21-48, February.
  32. Zvi Griliches, 1991. "The Search for R&D Spillovers," NBER Working Papers 3768, National Bureau of Economic Research, Inc.
  33. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(4), pages 305-360, October.
  34. Stephen Bond & Dietmar Harhoff & John Van Reenen, 2010. "Investment, R&D and Financial Constraints in Britain and Germany," NBER Chapters, National Bureau of Economic Research, Inc, in: Contributions in Memory of Zvi Griliches, pages 433-460 National Bureau of Economic Research, Inc.
  35. Bronwyn H. Hall, 1992. "Investment and Research and Development at the Firm Level: Does the Source of Financing Matter?," NBER Working Papers 4096, National Bureau of Economic Research, Inc.
  36. Opler, Tim C & Titman, Sheridan, 1994. " Financial Distress and Corporate Performance," Journal of Finance, American Finance Association, American Finance Association, vol. 49(3), pages 1015-40, July.
  37. Bharant N. Anand & Alexander Galetovic, 1998. "Weak Property Rights and hold-up in R&D," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 39, Centro de Economía Aplicada, Universidad de Chile.
  38. Alan J. Auerbach, 1982. "Taxes, Firm Financial Policy and the Cost of Capital: An Empirical Analysis," NBER Working Papers 0955, National Bureau of Economic Research, Inc.
  39. Aghion, Philippe & Bolton, Patrick, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(3), pages 473-94, July.
  40. Ward Brown, 1997. "R&D Intensity and Finance: Are Innovative Firms Financially Constrained?," FMG Discussion Papers, Financial Markets Group dp271, Financial Markets Group.
  41. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  42. Francis, Jennifer & Smith, Abbie, 1995. "Agency costs and innovation some empirical evidence," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 19(2-3), pages 383-409, April.
  43. Lerner, Joshua, 1998. ""Angel" financing and public policy: An overview," Journal of Banking & Finance, Elsevier, Elsevier, vol. 22(6-8), pages 773-783, August.
  44. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 34, pages 411.
  45. Josh Lerner, 1996. "The Government as Venture Capitalist: The Long-Run Effects of the SBIR Program," NBER Working Papers 5753, National Bureau of Economic Research, Inc.
  46. Williamson, Oliver E, 1988. " Corporate Finance and Corporate Governance," Journal of Finance, American Finance Association, American Finance Association, vol. 43(3), pages 567-91, July.
  47. Hall, Bronwyn & Van Reenen, John, 2000. "How effective are fiscal incentives for R&D? A review of the evidence," Research Policy, Elsevier, Elsevier, vol. 29(4-5), pages 449-469, April.
  48. Chung, Kee H & Wright, Peter, 1998. " Corporate Policy and Market Value: A q-Theory Approach," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 11(3), pages 293-310, November.
  49. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
  50. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, National Bureau of Economic Research, Inc, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  51. Asher Blass & Oved Yosha, 2003. "Financing R&D in mature companies: An empirical analysis," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(5), pages 425-447.
  52. Alam, Pervaiz & Walton, Karen Schuele, 1995. "Information Asymmetry and Valuation Effects of Debt Financing," The Financial Review, Eastern Finance Association, Eastern Finance Association, vol. 30(2), pages 289-311, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:8773. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.