Advanced Search
MyIDEAS: Login

The financing of innovative firms

Contents:

Author Info

  • Hall, Bronwyn H.

    () (University of California-Berkeley)

Abstract

To what extent are new and/or innovative firms fundamentally different from established firms, and therefore require a different form of financing? The theoretical background for this proposition is presented, and the empirical evidence on its importance is reviewed. Owing to the intangible nature of their investment, asymmetric-information and moral-hazard, these firms are more likely to be financed by equity than debt and behave in some cases as though they are cash-constrained, especially if they are small. Recognising the role for public policy in this area, many countries have implemented specific policies to bring the cost of financing innovation more in line with the level that would prevail in the absence of market failures.

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.eib.org/attachments/efs/eibpapers/eibpapers_2009_v14_n02_en.pdf#page=10
File Function: Full text
Download Restriction: no

Bibliographic Info

Paper provided by European Investment Bank, Economics Department in its series EIB Papers with number 8/2009.

as in new window
Length: 21 pages
Date of creation: 23 Dec 2009
Date of revision:
Handle: RePEc:ris:eibpap:2009_008

Contact details of provider:
Postal: 100, boulevard Konrad Adenauer, L-2950 Luxembourg
Phone: (+352) 43 79 1
Fax: (+352) 43 79 68 895
Email:
Web page: http://www.eib.org/efs/
More information through EDIRC

Related research

Keywords: R&D; innovation; financing; liquidity constraints; venture capital;

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. Lanjouw, Jean O & Schankerman, Mark, 2001. "Characteristics of Patent Litigation: A Window on Competition," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 129-51, Spring.
  2. Hall, Bronwyn H., 1992. "Investment and Research and Development at the Firm Level: Does the Source of Financing Matter?," Department of Economics, Working Paper Series qt5j59j6x3, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Guellec, Dominique & van Pottelsberghe de la Potterie, Bruno, 2007. "The Economics of the European Patent System: IP Policy for Innovation and Competition," OUP Catalogue, Oxford University Press, number 9780199216987, September.
  4. Joshua Lerner, 1994. "The Importance of Patent Scope: An Empirical Analysis," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 319-333, Summer.
  5. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  6. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  7. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  8. Nick Bloom, 2007. "Uncertainty and the Dynamics of R&D," CEP Discussion Papers dp0792, Centre for Economic Performance, LSE.
  9. Bronwyn H. Hall & Grid Thoma & Salvatore Torrisi, 2006. "The market value of patents and R&D: Evidence from European firms," KITeS Working Papers 186, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Nov 2006.
  10. Motohashi, Kazuyuki, 2008. "Licensing or not licensing? An empirical analysis of the strategic use of patents by Japanese firms," Research Policy, Elsevier, vol. 37(9), pages 1548-1555, October.
  11. Bronwyn H. Hall, 2003. "The Financing of Research and Development," Finance 0303003, EconWPA.
  12. Wagner, S. & Cockburn, I., 2010. "Patents and the survival of Internet-related IPOs," Research Policy, Elsevier, vol. 39(2), pages 214-228, March.
  13. Alberto Galasso & Mark Schankerman, 2010. "Patent thickets, courts, and the market for innovation," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 472-503.
  14. Haeussler, Carolin & Harhoff, Dietmar & Mueller, Elisabeth, 2009. "To Be Financed or Not … - The Role of Patents for Venture Capital Financing," Discussion Papers in Business Administration 8970, University of Munich, Munich School of Management.
  15. Stephen BOND & Dietmar HARHOFF & John VAN REENEN, 2005. "Investment, R&D and Financial Constraints in Britain and Germany," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 433-460.
  16. Bronwyn H. Hall & Josh Lerner, 2009. "The Financing of R&D and Innovation," NBER Working Papers 15325, National Bureau of Economic Research, Inc.
  17. Emmanuel Dechenaux & Brent Goldfarb & Scott Shane & Mari Thursby, 2006. "Appropriability and Commercialization: Evidence from MIT Inventions," Discussion Papers 05-017, Stanford Institute for Economic Policy Research.
  18. Mann, Ronald J. & Sager, Thomas W., 2007. "Patents, venture capital, and software start-ups," Research Policy, Elsevier, vol. 36(2), pages 193-208, March.
  19. Joshua S. Gans & David H. Hsu & Scott Stern, 2007. "The Impact of Uncertain Intellectual Property Rights on the Market For Ideas: Evidence From Patent Grant Delays," NBER Working Papers 13234, National Bureau of Economic Research, Inc.
  20. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
  21. Carlos J. Serrano, 2006. "The Dynamics of the Transfer and Renewal of Patents," Working Papers tecipa-227, University of Toronto, Department of Economics.
  22. P. Regibeau & K. Rockett, 2003. "Are More Important Patents Approved More Slowly and Should They Be?," Economics Discussion Papers 556, University of Essex, Department of Economics.
  23. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
  24. Dietmar Harhoff & Stefan Wagner, 2009. "The Duration of Patent Examination at the European Patent Office," Management Science, INFORMS, vol. 55(12), pages 1969-1984, December.
  25. Giuri, Paola & Mariani, Myriam, 2007. "Inventors and invention processes in Europe: Results from the PatVal-EU survey," Research Policy, Elsevier, vol. 36(8), pages 1105-1106, October.
  26. Steven N. Kaplan & Per Stromberg, 2003. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 281-315, 04.
  27. Dietmar Harhoff & Francis Narin & F. M. Scherer & Katrin Vopel, 1999. "Citation Frequency And The Value Of Patented Inventions," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 511-515, August.
  28. Dietmar Harhoff & Timm Körting, 1998. "Lending Relationships in Germany: Empirical Results from Survey Data," CIG Working Papers FS IV 98-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  29. Suma Athreye & John Cantwell, 2005. "Creating Competition? Globalisation and the emergence of new technology producers," Open Discussion Papers in Economics 52, The Open University, Faculty of Social Sciences, Department of Economics.
  30. David H. Hsu, 2006. "Venture Capitalists and Cooperative Start-up Commercialization Strategy," Management Science, INFORMS, vol. 52(2), pages 204-219, February.
  31. Maria Pluvia Zuniga & Dominique Guellec, 2009. "Who Licenses out Patents and Why?: Lessons from a Business Survey," OECD Science, Technology and Industry Working Papers 2009/5, OECD Publishing.
  32. Reitzig, Markus & Henkel, Joachim & Heath, Christopher, 2007. "On sharks, trolls, and their patent prey--Unrealistic damage awards and firms' strategies of "being infringed"," Research Policy, Elsevier, vol. 36(1), pages 134-154, February.
  33. Joshua S. Gans & David H. Hsu & Scott Stern, 2002. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 571-586, Winter.
  34. Ashish Arora & Andrea Fosfuri & Alfonso Gambardella, 2004. "Markets for Technology: The Economics of Innovation and Corporate Strategy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511819.
  35. Harhoff, Dietmar & Reitzig, Markus, 2004. "Determinants of opposition against EPO patent grants--the case of biotechnology and pharmaceuticals," International Journal of Industrial Organization, Elsevier, vol. 22(4), pages 443-480, April.
  36. Mueller, Elisabeth & Harhoff, Dietmar & Haeussler, Carolin, 2009. "To Be Financed or Not : The Role of Patents for Venture Capital Financing," ZEW Discussion Papers 09-003, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  37. Alfonso Gambardella, 2002. "'Successes' and 'Failures' in the Markets for Technology," Oxford Review of Economic Policy, Oxford University Press, vol. 18(1), pages 52-62, Spring.
  38. Raphael Amit & Lawrence Glosten & Eitan Muller, 1990. "Entrepreneurial Ability, Venture Investments, and Risk Sharing," Management Science, INFORMS, vol. 36(10), pages 1233-1246, October.
  39. Galasso, Alberto & Schankerman, Mark, 2008. "Patent Thickets and the Market for Innovation: Evidence from Settlement of Patent Disputes," CEPR Discussion Papers 6946, C.E.P.R. Discussion Papers.
  40. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 783-832.
  41. Lanjouw, Jean O & Schankerman, Mark, 2004. "Protecting Intellectual Property Rights: Are Small Firms Handicapped?," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 45-74, April.
  42. Baum, Joel A. C. & Silverman, Brian S., 2004. "Picking winners or building them? Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups," Journal of Business Venturing, Elsevier, vol. 19(3), pages 411-436, May.
  43. Alberto Galasso & Mark Schankerman, 2008. "Patent Thickets and the Market for Innovation: Evidence from Settlement of Patent Disputes," CEP Discussion Papers dp0889, Centre for Economic Performance, LSE.
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:
  1. Brown, Martin & Degryse, Hans & Höwer, Daniel & Penas, María Fabiana, 2012. "How do banks screen innovative firms? Evidence from start-up panel data," ZEW Discussion Papers 12-032, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Agustí Segarra & José García-Quevedo & Mercedes Teruel, 2013. "Financial constraints and the failure of innovation projects," Working Papers XREAP2013-01, Xarxa de Referència en Economia Aplicada (XREAP), revised Mar 2013.
  3. Xavier Boutin & Giacinta Cestone & Chiara Fumagalli & Giovanni Pica & Nicolas Serrano-Velarde, 2009. "The Deep-Pocket Effect of Internal Capital Markets," Working Papers 2009.108, Fondazione Eni Enrico Mattei.
  4. Jyrki Ali-Yrkkö & Petri Rouvinen & Timo Seppälä & Pekka Ylä-Anttila, 2011. "Who Captures Value in Global Supply Chains? Case Nokia N95 Smartphone," Journal of Industry, Competition and Trade, Springer, vol. 11(3), pages 263-278, September.
  5. Matteo Bugamelli & Luigi Cannari & Francesca Lotti & Silvia Magri, 2012. "The innovation gap of Italy’s production system: roots and possible solutions," Questioni di Economia e Finanza (Occasional Papers) 121, Bank of Italy, Economic Research and International Relations Area.
  6. Hoewer, Daniel & Schmidt, Tobias & Sofka, Wolfgang, 2011. "An information economics perspective on main bank relationships and firm R&D," Discussion Paper Series 1: Economic Studies 2011,19, Deutsche Bundesbank, Research Centre.

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:ris:eibpap:2009_008

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

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.