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R&D Financing And Growth

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  • Luca Spinesi
  • Mario Tirelli

Abstract

R&D investment are an important engine of growth and development.Yet economists have often claimed underinvestment, based on the consideration thatthese projects are more costly to finance, especially, due to the asymmetric informa-tion between inside and outside investors. Coherently, a recent empirical evidence hasshown that firms intensively active in R&D are less leveraged and rely more heavilyon internal finance. Motivated by this evidence, we study the e↵ects of asymmetricinformation and financial frictions within a GE economy of Schumpeterian tradition.The model and equilibrium concept are rich enough to represent investment and in-novation decisions, technology adoption/di↵usion through patent licensing and, mostimportantly, firms’ financial decisions. In this representation, R&D-intensive firmsmight e↵ectively rely more on internal sources and equity than on debt financing, rel-ative to what would happen in frictionless markets. Further, financial decisions a↵ectaggregate investment and income dynamics.

Suggested Citation

  • Luca Spinesi & Mario Tirelli, 2019. "R&D Financing And Growth," Departmental Working Papers of Economics - University 'Roma Tre' 0249, Department of Economics - University Roma Tre.
    • Handle: RePEc:rtr:wpaper:0249
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    Cited by:

    1. Yuanyue Wang & Zhaohui Yu & Xiaojing Yi, 2022. "Financing liabilities and inefficient investment of listed companies: Based on the adjustment effect of different financial structures," Australian Economic Papers, Wiley Blackwell, vol. 61(4), pages 848-875, December.
    2. Baoyin Qiu & Bo Cheng & Hangeng Qiu & Kam C. Chan, 2022. "Do firms with foreign residency rights controlling shareholders reduce R&D investment?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1403-1422, July.
    3. Matricano, Diego, 2022. "The influence of gender on technology transfer processes managed in Italian Young Innovative Companies: A stochastic frontier analysis," Technovation, Elsevier, vol. 111(C).
    4. Tobias Basse & Christoph Schwarzbach & J.-Matthias Schulenburg, 2023. "Dividend policy issues in the European pharmaceutical industry: new empirical evidence," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 24(5), pages 803-816, July.
    5. Gheorghe Hurduzeu & Radu Lupu & Iulia Lupu & Adrian Cantemir Calin, 2022. "The Nexus Between Research and Development, Protection of Intellectual Property Rights and Financial Development. A European Perspectiv," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 24(Special16), pages 970-970, November.

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    More about this item

    Keywords

    Innovation; R&D; Schumpeterian growth; financial equilibrium; asym-metric information; firm financial structure;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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