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The Financing of Research and Development

  • Bronwyn H. Hall

    (University of California at Berkeley & National Bureau of Economic Research & Institute of Fiscal Studies, London)

Evidence on the "funding gap" for R&D is surveyed. The focus is on financial market reasons for underinvestment in R&D that persist even in the absence of externality-induced underinvestment. The conclusions are that 1) small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital; 2) evidence for high costs of R&D capital for large firms is mixed, although these firms do prefer internal funds for financing these investments; 3) there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets are not highly developed; and 4) further study of governmental seed capital and subsidy programs using quasi-experimental methods is warranted.

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File URL: http://econwpa.repec.org/eps/fin/papers/0303/0303003.pdf
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Paper provided by EconWPA in its series Finance with number 0303003.

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Length: 24 pages
Date of creation: 21 Mar 2003
Date of revision:
Handle: RePEc:wpa:wuwpfi:0303003
Note: 24 pages, Acrobat .pdf
Contact details of provider: Web page: http://econwpa.repec.org

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