Relationship between debt, R&D and physical investment, evidence from US firm-level data
This paper is motivated by the hypothesis by Hall (1992) who claims that firms prefer to use debt to finance physical investment but not R&D, due to the risky nature of R&D. Employing a dynamic simultaneous approach and R&D Master File, the relationship between debt, R&D and physical investment is reestimated with the full sample and two sub-samples, including firms in all industries, in science-based industries, and in nonscience-based industries, respectively. First, the results show that the contemporary relationship between R&D and physical investment is positively reciprocal, particularly in science-based industries. That is, current R&D positively affects and is positively affected by current physical investment. Second, it is shown that, in (non-)science-based industries, current R&D (raises) lowers current debt and current physical investment raises current debt; and that current debt raises current physical investment and (raises) reduces R&D. In other words, the evidence supports that debt is a resource to finance both physical investment and R&D in nonscience-based industries, but debt is only a resource to finance physical investment but not R&D in science-based industries.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 12 (2002)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAFE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAFE20|
When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:12:y:2002:i:2:p:105-121. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.