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Understanding the financing of innovation and commercialization: the case of the Canadian functional food and nutraceutical sector

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  • Deepananda Herath
  • John Cranfield
  • Spencer Henson

Abstract

We develop and implement two models to show what factors affect a firm's decision to seek external financing and the level of financing obtained in the Canadian functional food and nutraceutical sector. Data from a national survey of functional foods and nutraceutical firms in Canada, conducted by Statistics Canada in 2003, is used for this analysis. Firm size, being privately held and engaging in contractual arrangements have negative impacts on the likelihood of a firm seeking external funding, while firms which are intensively involved in the functional food and nutraceutical sector, with greater prospects for business expansion and/or involved in partnerships are more likely to seek external financing. Larger firms and those involved in functional food and nutraceutical research and development receive a greater amount of capital when they decide to raise capital. However, firms focused on functional foods and nutraceuticals, as opposed to more diversified firms, and those involved in product development and concept scale-up, receive less capital. Our findings highlight the importance of public support in addressing the capital requirements of functional food and nutraceutical firms and underscore the considerable burden borne by smaller firms in this respect.

Suggested Citation

  • Deepananda Herath & John Cranfield & Spencer Henson, 2010. "Understanding the financing of innovation and commercialization: the case of the Canadian functional food and nutraceutical sector," Applied Economics, Taylor & Francis Journals, vol. 42(21), pages 2667-2682.
  • Handle: RePEc:taf:applec:v:42:y:2010:i:21:p:2667-2682
    DOI: 10.1080/00036840801964658
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    References listed on IDEAS

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    1. Bronwyn Hall, 2004. "The financing of research and development," Chapters,in: Financial Systems, Corporate Investment in Innovation, and Venture Capital, chapter 2 Edward Elgar Publishing.
    2. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
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    Cited by:

    1. Roucan-Kane, Maud & Gray, Allan W. & Boehlje, Michael, 2011. "Approaches for Selecting Product Innovation Projects in U.S. Food and Agribusiness Companies," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 14(4).

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