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Technology and Financial Structure: Are Innovative Firms Different?

  • Marinescu, Ioana
  • Klemm, Alexander
  • Bond, Stephen
  • Aghion, Philippe

We use data on publicly traded U.K. firms to investigate whether financing choices differ systematically with R&D intensity. As well as looking at a balance sheet measure of the debt/assets ratio, we also consider the probability of raising finance by issuing new equity, and the shares of bank debt and secured debt in total debt. We find a nonlinear relationship with the debt/assets ratio: firms that report positive but low R&D use more debt finance than firms that report no R&D, but the use of debt finance falls with R&D intensity among those firms that report R&D. We find a simpler relationship with the probability of issuing new equity: Firms that report R&D are more likely to raise funds by issuing shares than firms that report no R&D, and this probability increases with R&D intensity. The shares of bank debt and secured debt in total debt are both lower for firms that report R&D compared to those that do not, and tend to fall as R&D intensity rises. We discuss possible explanations for these patterns.

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File URL: http://dash.harvard.edu/bitstream/handle/1/3200323/aghion_technologyfinancial.pdf
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Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3200323.

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Date of creation: 2004
Date of revision:
Publication status: Published in Journal of the European Economic Association
Handle: RePEc:hrv:faseco:3200323
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Web page: http://www.economics.harvard.edu/

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  1. Rachel Griffith & Stephen Redding & John Van Reenen, 2000. "Mapping the two faces of R&D: productivity growth in a panel of OECD industries," IFS Working Papers W00/02, Institute for Fiscal Studies.
  2. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2002. "Distance to Frontier, Selection, and Economic Growth," NBER Working Papers 9066, National Bureau of Economic Research, Inc.
  3. Carlin, Wendy & Mayer, Colin, 1999. "Finance, Investment and Growth," CEPR Discussion Papers 2233, C.E.P.R. Discussion Papers.
  4. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, March.
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