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Innovation, Trade, and Finance

Listed author(s):
  • Peter Egger
  • Christian Keuschnigg

Heterogeneous firms invest in R&D and expansion investment. Venture capital specializes in R&D financing where problems are largest. Marginal firms get funded by venture capital, while firms with larger debt capacity obtain cheaper bank financing. In the latestage, cash-rich firms invest at an optimal scale, while cash-poor firms are restricted. A country's financial and institutional development determines entry and expansion of firms and their comparative advantage in producing innovative goods. We illustrate how tariffs, R&D subsidies, institutional reform and venture capital improve access to capital, expand innovative industries, boost national welfare and may result in ambiguous international welfare spillovers. (JEL D21, F11, F13, G24, G32, O32)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mic.20120032
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File URL: http://www.aeaweb.org/aej/mic/ds/0702/2012-0032_ds.zip
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Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 7 (2015)
Issue (Month): 2 (May)
Pages: 121-157

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Handle: RePEc:aea:aejmic:v:7:y:2015:i:2:p:121-57
Note: DOI: 10.1257/mic.20120032
Contact details of provider: Web page: https://www.aeaweb.org/aej-micro
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