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Capital Control, Debt Financing and Innovative Activity

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  • Czarnitzki, Dirk
  • Kraft, Kornelius

Abstract

The present paper first discusses theoretically the different incentives of manager- versus owner-controlled firms for investment into innovative activity. In addition, the role of debt financing is analyzed. Subsequently the results from an empirical study on the determinants of innovative activity measured by patent applications are presented. A sample of German firms covering 2,793 observations is used, and it turns out that companies with widely held capital stock are more active in innovation, i.e. weakly controlled managers show a higher innovation propensity. However, the higher the leverage the more disciplined the managers are.

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  • Czarnitzki, Dirk & Kraft, Kornelius, 2004. "Capital Control, Debt Financing and Innovative Activity," ZEW Discussion Papers 04-75, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:2362
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    More about this item

    Keywords

    Innovation; Patents; Corporate Governance; Limited Dependent Variables;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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