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The Effects of Private Investments in Public Equity on R&D Investment in Small and Medium-Size Enterprises

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  • Minshik Shin
  • Sooeun Kim

Abstract

This paper provides evidence that small and medium-size enterprises (SMEs) use a portion of private investments in public equity (PIPEs) for current research and development (R&D) investment, hold the rest in liquidity reserves such as cash assets and working capital, and ultimately use these reserves to smooth R&D investment. That is, PIPEs may have a direct effect on R&D investment and an indirect or smoothing effect using liquidity reserves. This paper also shows that innovative SMEs such as venture businesses, inno-biz firms, and management innovative firms are more likely to use PIPEs for R&D investment than are noninnovative SMEs. The implications of this paper are that PIPEs can be used as an important source of external financing to fund R&D investment and can be particularly valuable for R&D investment in innovative SMEs.

Suggested Citation

  • Minshik Shin & Sooeun Kim, 2014. "The Effects of Private Investments in Public Equity on R&D Investment in Small and Medium-Size Enterprises," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S2), pages 43-59.
    • Handle: RePEc:mes:emfitr:v:50:y:2014:i:s2:p:43-59
    DOI: 10.2753/REE1540-496X5002S203
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    Cited by:

    1. Yano, Go & Shiraishi, Maho, 2020. "Finance, institutions, and innovation activities in China," Economic Systems, Elsevier, vol. 44(4).
    2. Li Jing & Huying Zhang, 2023. "Venture Capital, Compensation Incentive, and Corporate Sustainable Development," Sustainability, MDPI, vol. 15(7), pages 1-19, March.

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